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Anonymous
On a side note, how do the fees for ARK ETFs work, are they automatically deducted from a percentage whatever we invest on a monthly basis? A bit confused...
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JeffreyLeeZQ
09 Apr 2021
Writer at Jeffreyleezq.com
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There are just as many new economy passively managed ETFs relative to Ark Invest.
SPDR S&P Kensho series of ETFs:
Just to name a few & expense ratio is approximately 0.20% p.a.
Due to its holdings & Low expense ratio has its trade-off, that is... fund is based on sampling strategy that doesn’t necessarily mimic the S&P Kensho new economy index.
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Chris
29 Mar 2021
Owner and Writer at Tortoisemoney.com
ETF expense ratios are deducted on a daily basis from the net asset value of the fund. This means th...
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Understand you wanna invest in ARK ETFs, but still I would like to point out that ARK ETFs are actively managed ETFs, so you might wanna take note of the expense ratio, since you still have a long investment time horizon to go. As such, any additional cost will have a more drastic effect on your returns.
Take the ETF ARKK for example, ARKK expense ratio is 0.75%, while a passive index ETF like VOO is only 0.03%.
To put it into perspective, imagine you have $10,000 invested. If the equity grow at 10% a year for the next 20 years at 0.03% fees, you'd end up with about $67,000. If, on the other hand, you paid 0.75% a year in fees, after 20 years you'd only have about $58,000. A difference of $9,000.
Stretching the time horizon to 40 years, you would get $448,000 vs $344,000 respectively. A whopping $104,000 difference. The 0.72% extra you paid every year would wipe out almost 23% of your final account value in this case.
In addition, for ARKK wise, the bulk of the growth actually only happened in late 2019 onwards, and might be something you want to consider as well. In general, most actively managed ETFs or mutual funds don't beat the S&P500 in the long term.
Cheers and all the best in your investment journey! :)
- Jeffrey (jeffreyleezq.com)