Key Points
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Cathie Wood’s ARK Innovation ETF has become a lightning rod for many investors.
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Its emerging-innovation focus has led to big returns at times, but it also comes with significant volatility.
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It has low overlap and low correlation with the S&P 500, making it an ideal addition for diversification.
- 10 stocks we like better than Ark ETF Trust – Ark Innovation ETF ›
The ARK Innovation ETF (NYSEMKT: ARKK) has never been a fund for investors who can’t stomach volatility. Given the nature of what it invests in, volatility is something folks will have to accept. As investors have seen over history, however, the rewards for taking on that volatility can be substantial.
Cathie Wood‘s flagship fund focuses on highly innovative companies developing the technologies that could reshape industries or even the world economy. That includes artificial intelligence (AI), robotics, genomics, fintech, and autonomous vehicles. As a result, this fund looks almost nothing like a traditional S&P 500 fund.
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The difference is why investors should still consider owning it despite all the volatility and mixed results.
Image source: Getty Images.
Owning ARKK isn’t about beating the S&P 500
The ARK Innovation ETF often gets branded as a tech fund. In reality, it’s primarily a mix of the tech, healthcare, and consumer sectors. Among the top 10 holdings, there are familiar megacap names mixed with a handful of smaller, emerging businesses.
| Rank/Company | Weight | Rank/Company | Weight |
|---|---|---|---|
| 1. Tesla | 9.51% | 6. Coinbase Global | 4.08% |
| 2. Space Exploration Technologies | 5.23% | 7. Advanced Micro Devices | 3.82% |
| 3. Tempus AI | 4.87% | 8. Palantir Technologies | 3.74% |
| 4. CRISPR Therapeutics | 4.86% | 9. Circle Internet Group | 3.68% |
| 5. Shopify | 4.26% | 10. Robinhood Markets | 3.65% |
Data source: ARK Funds. Weighting is as of Aug. 5, 2026.
If you know anything about Cathie Wood’s investing style, it’s that she waits years for a stock’s story to play out. Consider Tesla (NASDAQ: TSLA), for example. That’s one of her original stock positions and the one that rocketed her to fame when her moon-shot price target was actually hit.
It’s consistently been one of the fund’s biggest holdings, and she still buys the dips today. She has said she’s a believer in its potential as an AI and robotics company, not just an electric vehicle company.
Because of low turnover and long holding periods, ARKK’s goal isn’t to try to beat the S&P 500 every year, despite the fact that it’s actively managed. She wants to outperform the index over the long term.
Data by YCharts.
How to incorporate ARKK into your portfolio
The ARK Innovation ETF offers something that few ETFs in the marketplace can — a truly unique portfolio that’s an ideal diversifier with big growth potential. One of the things you can give Cathie Wood credit for is that she’s always stuck to her investing style. She never overweighted the “Magnificent Seven” stocks when they were leading the market higher. She remained committed to her emerging innovation theme even when it was deeply underperforming.
Whether or not this fund will outperform at any given moment is anyone’s guess. But it deserves consideration as part of a diversified portfolio in a very modest allocation.
Its low overlap and low correlation with the S&P 500 is one of its strengths. It may go for multiple years lagging the index. But it’s one of the real home run swings in the ETF marketplace.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Palantir Technologies, Shopify, Tempus AI, and Tesla. The Motley Fool recommends CRISPR Therapeutics and Coinbase Global. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
