How To Own Tesla While Reducing Your Overall Risk

Shares of electric car maker Tesla Inc. (TSLA) are down nearly 50% since December of 2018. That is quite a fall and one that attracts the attention of investors looking to buy a stock after it has shed a large amount of its value in the hopes that the stock price will rebound in the future.

We have seen Tesla’s stock crash before and bounce back even higher. This gives hopes that the company can turn things around and the stock will once again see the $300 handle. Regardless though of what the stock has done in the past, anyone considering investing in Tesla today should be cautious and try to limit their risk as much as possible.

One way of doing this is by simply buying an Exchange Traded Fund, which has a position in Tesla. That way if the stock continues to crash and eventually burns, your investment doesn’t take as much of a hit as if it would if you directly purchase shares of Tesla. On the flip side, if Elon Musk stabilizes the company and investors begin to believe his story, causing Tesla to climb higher, you reap the rewards, and the ETF will also move higher. While the move higher in an ETF may not be as substantial, it would still increase in value if it held a large portion of the auto-maker.

With that in mind, let us take a look at a few different ETFs that hold varying sizes of Tesla in their portfolio’s.

The first ETF is the ARK Innovation ETF (ARKK), which has Tesla as its top holding. Tesla represents 9.96% of the fund’s assets. The fund has 38 different positions, which are companies that focus on disruptive and innovative firms. Despite Tesla’s poor recent performance, the fund is still up 11.64% and down just a half of a percent over the last 12 months. ARKK would see a massive move upwards if Tesla regained the value it has lost, but due to its exposure to the electric car company, if Tesla does continue to decline, ARKK will certainly take a substantial hit. Continue reading "How To Own Tesla While Reducing Your Overall Risk"

Should You Own ETFs In A "Stock Pickers Market"

Most Wall Street participants believe 2019 will be a “stock pickers” year; So how will that affect Exchange Traded Fund investors?

Well first off, what is a “Stock Pickers” market or year? That is a market in which to make a decent return; investors will need to pick individual stocks, not just buy the market as a whole or an index such as the S&P 500 or Dow Jones. At this point, most Wall Street analysts believe the major market indexes will end the higher just slightly higher. In mid-February, Goldman Sachs analyst posted a note indicating they think the S&P 500 will only climb to 3,000 by the end of the year, but the next few months could be flat.

Vanguard went a little further and said it believes the market will only return roughly 5% median annualized return over the next 10 years. Vanguard’s opinion paints an even worse picture than Goldman’s and hints at the idea that investors will need to be “stock pickers” for the next decade if they want to see returns greater than 5% annualized.

So, the experts are telling us that investors need to cherry pick individual stocks if they want to make a real-return greater than a few percent over the next year or maybe more. But what if they don’t know how to find and pick market-beating stocks, they need not worry because that is why actively managed ETFs where created. Continue reading "Should You Own ETFs In A "Stock Pickers Market""

Bitcoin Helped ARK Win 'Top ETF' in 2017

ETF.com’s “ETF of The Year” award went to the ARK Innovation ETF (ARKK) for 2017. The award was given to ARKK for a number of reasons, but the top two were due to its exposure to disruptive technology in 2017 and its strong performance. Both of those key metrics for winning the award were partly due to the fund's exposure to Bitcoin.

ARKK owned Bitcoin through buying shares of the Bitcoin Investment Trust (GBTC). ARKK had anywhere between 6% and 10% of its assets in GBTC during 2017 while the cryptocurrency rose higher during the end of last year. During that time Bitcoin was often ARKK’s top holding. This helped the fund produce an 85% return for investors in 2017. Just for comparison, GBTC was up roughly 1,550% in 2017.

What’s more interesting though is that while GBTC is now down more than 65% year-to-date in 2018, ARKK is up more than 21% this year. The main reason for this reversal is because sometime in January of 2018 ARKK’s management team started selling their position in GBTC. As of today, ARKK still has a small position in GBTC, but it represents just 0.26% of the fund's assets.

ARK, the issuer of the ARKK ETF recently told ETF.com that it was a “complicated decision” to cut its Bitcoin investments, but that it was driven largely by regulatory and tax concerns, more so than the true “merits” of Bitcoin. Continue reading "Bitcoin Helped ARK Win 'Top ETF' in 2017"