HEAD-TO-HEAD: ARK Innovation ETF versus Fidelity Blue Chip Growth ETF

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Robby Greengold, Morningstar

Introduction

US stocks rebounded on Thursday after a steep decline amid Russia’s invasion of Ukraine. The S&P 500 closed 1.5% higher to 4288.70, the tech-heavy Nasdaq Composite finished up 3.3%, to 13473.59 and the Dow Jones Industrial Average gained 0.3%, to 33223.83.

Even though Russia’s strikes on Ukraine have no analogues in modern warfare—especially due to Ukraine’s relationship with NATO countries—it is important to keep in mind how financial markets generally reacted to previous wars and serious geopolitical events, Kelly Bogdanova, portfolio analyst at RBC Wealth Management, said in a report.

“After all, almost all of those situations were also unique. In the 18 post-World War II events that we evaluated, the S&P 500’s selloff was limited in magnitude at 6.2%, on average, and typically played out over a brief period,” she said.  At times the selloff commenced before the actual war started (as in this case).

While this 6.2% level of decline is nothing to dismiss, it’s well within the bounds of a typical pullback in many scenarios that often confront markets, including those that have nothing to do with military risks, Bogdanova added.

Against this background, FSA asked Robby Greengold, strategist at Morningstar, to select two actively-managed US equity ETF products for comparison: the ARK Innovation ETF and Fidelity Blue Chip Growth ETF.

At first blush, investors might think that an actively managed exchange-traded fund (ETF) is an oxymoron. “They can be forgiven for this mistake. After all, for their first 15 years of existence, ETFs were the exclusive domain of indexers. Even today, active ETFs account for just 3.5% of the $6.6 trillion that investors have allocated to ETFs,” Greengold said.

Active ETFs are not a contradiction, but an innovation, he said. “ETFs are just a vessel, a wrapper in which asset managers package and distribute investment strategies to investors — active, passive, and everything in between”.

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