TD Ameritrade: Tom Lydon talks about ARKK and commodities
ETF Trends CEO Tom Lydon had a lot to share on the ARK Innovation ETF (ARKK) with Nicole Petallides from TD Ameritrade.
As Lydon points out, today the ARKK is up, while the NASDAQ is down. This brings up the idea that while there is a strong correlation with the S&P 500; 30% of this weighting is spread over ten shares (mainly FAANG shares). With NASDAQ, it’s 50%. With this current proliferation of ETFs with the number of choices seen, especially with COVID-19, there is a lot of interest in thematic stocks and thematic ETFs.
This includes a whole host of work focused on robotics, AI, cloud computing, clean energy, working from home, biotechnology, and more. “There’s a lot more to choose from,” says Lydon, which is currently $ 9 trillion in ETFs.
Regarding ARKK as a long term investment, Lydon explains how diversification is a big part of what to consider in relation to the fund. Investors all know the S&P 500 has been hard to beat because of FAANG stocks. The question now is whether they will continue to dominate the markets in the years to come? It might be wise to allocate a future allocation to those disruptive tech companies that will be future FAANG stocks, or at least to hedge in those areas.
“This is something that on the ETF side we look at all the time,” says Lydon. “We find that advisors spend a lot more time focusing on new opportunities and innovation. As we saw in COVID, it really did resurface the growth of these types of businesses and stocks. They have been challenged. And, people working from home have really improved their game from a technological standpoint and embraced growth with these types of businesses. As a result, more and more people are looking to diversify outside of the major market indices. “
Are the basic products still available?
More and more, there is a shift towards real commodities like gas, food and base metals, and they continue to do well. With that in mind, gold tends to be a second half player when looking at inflation. It was only after other commodities started to take off that gold came into play so suddenly.
“If you’re worried about inflation, gold isn’t the only way to protect yourself,” Lydon adds. “There are many commodity-based funds in ETFs that can help you diversify a bit more. “