ARK Invest’s Strong Appetite for Risk

May 29. 2021. 6 mins read

Today’s young tech investors don’t seem to care much about risk. If they did, they’d first need to define risk. For any given portfolio of stocks, a common risk is correlated returns (when stocks move together in the same direction). This is why diversification is such an important concept.

If you’re invested in one stock, you’re overdosing on company-specific risk. If you’re only invested in small caps, that’s a size bet which increases risk. If you only buy U.S. stocks, you’re exposed to single country and currency risk. If you only buy healthcare stocks, that’s an industry exposure risk. And if your stocks move together as a group even if they’re not in the same industry – gene editing stocks and 3D printing stocks are two good examples – then that’s a risk that’s not so obvious.

Risk can also be defined as “the volatility of returns.” When there are external factors increasing volatility, we need to evaluate them. One risk factor that’s increasing our portfolio volatility is “the ARK effect.”

What is the ARK Effect?

“The ARK effect” is simply the extent to which ARK Invest – the leading thematic fund manager – influences the price of certain

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