One of the most interesting rebuttals to bears pointing out the obvious flaws and bad price action in ARK is “buy the dip because Cathie Wood said this is a 5 year plan”. This sounds great in theory and probably calms the bag holders at night, but realistically it’s horrible advice.
In 2000 dot com bubble, people who were buying every stock with dot com at the end probably thought it was a good idea. In fact, when the bubble popped and many investors kept averaging down, they probably had the same thought. It’ll go back up in 5 years anyways, right? Wrong. From the peak of the tech bubble, it took the NASDAQ nearly 12 years to return back to where it was. Even if you picked the top of the cream, let’s say Microsoft – MSFT did not return to its peak 2000 price again until 2010. So, saying everything is a 5 year plan and you’ll be a millionaire in 2026 is great, until you’re stuck holding a stock or in this case, ETF, for 10 years in the red.
What makes all of this worse is that Cathie Wood trades daily. One of the reason indexes tend to go up is because the winners tend to occupy larger and larger percentages of the index over time. For example, there could be a company today that’s only a small percentage of the index but if the company continues to perform strongly and the stock goes up, it becomes a larger portion of the index, thus benefiting the index holder. But Cathie doesn’t let that natural process take place. She constantly sells Tesla on up days to dilute her funds with other stocks, that may not be nearly as strong. This destroys the entire purpose of a 5 year plan.
Buyer beware on ARK and if you’re a bag holder, probably a good idea to sell. Good luck to all.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.