Some may say that a comparison between the ARK Innovation ETF (ARKK) and the Straits Times Index (STI) ETF is like the biblical battle between David and Goliath. They represent the clash between traditional businesses and new-age business models. After all, the market capitalisation of both the ARKK and STI ETFs as of 29 April 2022 was US $12 billion and SGD $1.7 billion, respectively.
The difference between them is more than the size of the funds. The ARKK is an actively managed fund, run by its CEO, Cathie Woods. The fund selects and invests in companies that are relevant to its disruptive innovation investment theme. Meanwhile the STI ETF is a passively managed fund that tracks the performance of the top 30 stocks listed on the Singapore Exchange.
During the last pandemic-fueled recession in 2020, many local investors shunned the slow-moving STI ETF in favour of the innovation-focused ARK ETF. So, how have these two ETFs performed over the last two years?
We calculated the performance of both ETFs using a lump sum and a dollar-cost average investment approach to find out.
Lump Sum Investment Approach
We will begin our comparison between the ARK Innovation ETF (ARKK) and the SDPR Straits Times Index (ES3) using a lump-sum investment approach. This assumes that we are able to invest a larger sum of capital at one time and we don’t continue contributing regularly to the investment.
Read Also: Understanding How Regular & Lump Sum Savings Plans Work In Singapore
Lump Sum Investing In ARK Innovation ETF
Let’s work out the calculation if you invested a lump sum of USD $28,000 as your investment capital in ARK Innovation ETF from 2020 to 2022. Based on the investment capital of $28,000 and the entry price of $50.50 per unit, you would have received a total of 554.4554 units of the ARKK.
| Period | Value At The (Close) First Trading Day Of The Year | Value At The (Close) Last Trading Day Of The Year |
| 2020 | $28,000 | $69,024.16 (+146.51%) |
| 2021 | $28,000 | $21,240.84 (-24.14%) |
| 2022 | $28,000 | *$13,605.94 (-51.41%) |
| 2020 to 2022 | $28,000 | *$26,131.49 (-6.67%) |
*Till End April 2022
First, let’s look at a year-by-year return. Had you started investing in the ARKK in 2020, your investment would have gained over 146%. However, had you started investing in the ARKK at the start of either 2021 or 2022, you would have had a net loss of (-24%) and (-51%), respectively.
In total, had you stayed invested in ARKK from the start of 2020 to the end of April 2022, your initial $28,000 investment value would have dropped to $26,131, or a loss of (-6.7%).
The ARKK distributes one round of dividends annually in December. If we were to include the two rounds of dividends ($2.827) collected for the total number of ARKK ETF units held from 2020 to 2022, it would have amounted to $1,567.45 or 5.6% based on the initial cost of investment. This cushions the overall net loss on your investment capital to around -$301.06 or -1.08%.
Read Also: Complete Guide To ETF investing in Singapore
Lump Sum Investing in SPDR Straits Times Index (STI) ETF
Let’s work out the calculation if you invested a lump sum of SGD $28,000 in SDPR STI ETF from 2020 to 2022.
Based on the investment capital of $28,000 and the entry price of $3.31 per unit, you would have received a total of 8459.2145 units of the STI ETF.
| Period | Value At The (Close) First Trading Day Of The Year | Value At The (Close) Last Trading Day Of The Year |
| 2020 | $28,000 | 24,616.31 (-12.08%) |
| 2021 | $28,000 | 30,735.24 (9.77%) |
| 2022 | $28,000 | 29,811.56 (6.47%) |
| 2020 to 2022 | $28,000 | 28,676.74 (2.42%) |
*Till End April 2022
First, let’s look at a year-by-year return. Had you started investing in the STI ETF in 2020, your investment would have lost over (-12%). However, had you started investing in STI at the start of either 2021 or 2022, you would have had a net gain of (+9%) and (+6%), respectively.
In total, had you stayed invested in the STI ETF from the start of 2020 to the end of April 2022, your initial $28,000 investment value would have gained by +2.4%, or an investment value of $28,676.
The STI ETF distributes two rounds of dividends annually, in February and August. If we were to include the five rounds of dividends ($0.249) collected for the total number of STI ETF units held from 2020 to 2022, it would have amounted to $2,106.34. This will bring your overall net gain on your investment capital to around $2,783.08, or 9.94%.
Dollar-Cost Average (DCA) Investment Approach
Next, we will use the dollar-cost average method to compare the returns between the ARK Innovation ETF (ARKK) and the SDPR Straits Times Index (ES3). This approach involves investing a specified amount at regular intervals (e.g. every month or quarter), depending on the investor’s preference.
Read Also: 20 Investment Platforms Singaporeans Can Use To Invest A Fixed Monthly Sum
Dollar-Cost Average (DCA) In ARK Innovation ETF (ARKK)
Here’s the calculation for the ARK Innovation ETF had we taken the dollar-cost average approach and invested USD $1,000 per month from January 2020 to April 2022.
For our calculation, we have used the closing price of the first trading day of each month as our purchase price.
| Period (Year) Month |
ARK ETF (Purchase Price) |
Units Bought Each Month | Accumulated Total Units |
| (2020) – Jan | 50.5 | 19.8020 | 19.8020 |
| (2020) – Feb | 53.96 | 18.5322 | 38.3342 |
| (2020) – Mar | 54.08 | 18.4911 | 56.8254 |
| (2020) – April | 40.24 | 24.8509 | 81.6762 |
| (2020) – May | 52.38 | 19.0913 | 100.7675 |
| (2020) – June | 64.8 | 15.4321 | 116.1996 |
| (2020) – July | 73.5 | 13.6054 | 129.8050 |
| (2020) – August | 83.68 | 11.9503 | 141.7553 |
| (2020) – September | 97.21 | 10.2870 | 152.0423 |
| (2020) – October | 94.54 | 10.5775 | 162.6199 |
| (2020) – November | 90.8 | 11.0132 | 173.6331 |
| (2020) – December | 112.76 | 8.8684 | 182.5015 |
| (2021) – January | 124.69 | 8.0199 | 190.5214 |
| (2021) – February | 142.62 | 7.0116 | 197.5330 |
| (2021) – March | 136.7 | 7.3153 | 204.8483 |
| (2021) – April | 120.85 | 8.2747 | 213.1230 |
| (2021) – May | 116.91 | 8.5536 | 221.6766 |
| (2021) – June | 111.25 | 8.9888 | 230.6654 |
| (2021) – July | 129.16 | 7.7423 | 238.4077 |
| (2021) – August | 121.12 | 8.2563 | 246.6640 |
| (2021) – September | 123.72 | 8.0828 | 254.7467 |
| (2021) – October | 111.17 | 8.9952 | 263.7420 |
| (2021) – November | 125.12 | 7.9923 | 271.7343 |
| (2021) – December | 98.6 | 10.1420 | 281.8763 |
| (2022) – January | 96.99 | 10.3103 | 292.1866 |
| (2022) – February | 77.08 | 12.9735 | 305.1602 |
| (2022) – March | 68.31 | 14.6391 | 319.7993 |
| (2022) – April | 67.54 | 14.8060 | 334.6054 |
Total Investment From 2020 (January) to 2022 (April): $28,000
Total Units Held At April 2022: 334.6054 shares
Average Cost Per Share: $83.68
Total Dividends Received: $945.93
Dividend Yield (on cost): 3.38%
If you had DCA into ARKK from January 2020 to April 2022 based on a monthly contribution of $1,000, you would have accumulated a total of 334.6054 units at a total cost of $28,000. The average cost of one full unit would be $83.68. Based on the closing price ($47.13) on 29 April 2022, your investment value would have dropped to $15,769.95. This represents a loss of (-$12,230.05) or (-43.68%).
As mentioned earlier, ARKK distributed one round of dividends in 2020 and 2021, which amounted to a total of $945.93 in dividends collected for the units held. This represents a dividend yield of 3.38% based on the initial cost of investment. After including the dividends for the three-year period, it would have amounted to a total investment loss of -$11,284.12 or (-40.30%).
Dollar-Cost Average (DCA) In SDPR Straits Times Index (STI) ETF
Here’s the calculation for the STI ETF had we taken the dollar-cost average approach and invested $1,000 per month from January 2020 to April 2022. For our calculation, we have used the closing price on the first trading day of each month as our purchase price.
| (Year) Month | STI ETF (Purchase Price) |
Units Bought Each Month | Accumulated Total Units |
| (2020) – Jan | 3.31 | 302.1148 | 302.1148 |
| (2020) – Feb | 3.178 | 314.6633 | 616.7781 |
| (2020) – Mar | 3.019 | 331.2355 | 948.0136 |
| (2020) – April | 2.45 | 408.1633 | 1356.1769 |
| (2020) – May | 2.57 | 389.1051 | 1745.2819 |
| (2020) – June | 2.6 | 384.6154 | 2129.8973 |
| (2020) – July | 2.66 | 375.9398 | 2505.8372 |
| (2020) – August | 2.55 | 392.1569 | 2897.9940 |
| (2020) – September | 2.56 | 390.6250 | 3288.6190 |
| (2020) – October | 2.52 | 396.8254 | 3685.4444 |
| (2020) – November | 2.48 | 403.2258 | 4088.6702 |
| (2020) – December | 2.85 | 350.8772 | 4439.5474 |
| (2021) – January | 2.9 | 344.8276 | 4784.3750 |
| (2021) – February | 2.93 | 341.2969 | 5125.6720 |
| (2021) – March | 2.97 | 336.7003 | 5462.3723 |
| (2021) – April | 3.19 | 313.4796 | 5775.8519 |
| (2021) – May | 3.2 | 312.5000 | 6088.3519 |
| (2021) – June | 3.22 | 310.5590 | 6398.9109 |
| (2021) – July | 3.17 | 315.4574 | 6714.3683 |
| (2021) – August | 3.2 | 312.5000 | 7026.8683 |
| (2021) – September | 3.12 | 320.5128 | 7347.3812 |
| (2021) – October | 3.09 | 323.6246 | 7671.0057 |
| (2021) – November | 3.26 | 306.7485 | 7977.7542 |
| (2021) – December | 3.15 | 317.4603 | 8295.2145 |
| (2022) – January | 3.18 | 314.4654 | 8609.6799 |
| (2022) – February | 3.37 | 296.7359 | 8906.4158 |
| (2022) – March | 3.27 | 305.8104 | 9212.2262 |
| (2022) – April | 3.41 | 293.2551 | 9505.4814 |
Total Investment From 2020 (April) to 2022 (April): $28,000
Total Units Held At April 2022: 9,505.4814 shares
Average Cost Per Share: $2.945
Total Dividends Received: $1,166.93
Dividend Yield (on cost): 4.15%
If you had invested in the STI ETF from January 2020 to April 2022 based on a monthly contribution of $1,000, you would have accumulated a total of 9505.4814 units at a cost of $28,000. The average cost of one unit is $2.945. Based on the closing price ($3.39) on 29 April 2022, your investment value would be worth $32,223.58 or a gain of 15.08%.
As mentioned earlier, the STI ETF distributes dividends twice a year. You would have received a total of five rounds of dividends from 2020 to 2022, amounting to a total of $1,166.93. This represents a dividend yield of 4.15% based on the cost of investment. After including the dividends received, the total gain in the STI ETF would amount to $5,387.51, or 19.24%.
Read Also: How Much Dividends Do Stocks In The STI ETF Pay Out Each Year?
Lump Sum Investing Or Dollar Cost Averaging (DCA): Which Is A Better Strategy?
By comparing the returns achieved using both the lump sum and dollar-cost average strategies, we can conclude that the highest return was derived using the DCA approach on the STI ETF.
| Initial Investment/ (Units) | Investment Value / % Gain or (Loss) | Investment Value with Dividends / % Gain or (Loss) | |
| Lump Sum Investment (ARKK) |
$28,000 (554.4554) |
$26,131.49 (-6.67%) |
$27,698.94 (-1.08%) |
| Lump Sum Investment (ES3) |
$28,000 (8459.2145) |
$28,676.74 (2.42%) |
$30,783.08 (+9.94%) |
| DCA Investment (ARKK) | $28,000 (334.6054) |
12,230.05 (-43.68%) |
$11,284.12 (-40.30%) |
| DCA Investment (ES3) | $28,000 (9505.4814) |
$32,223.58 (+15.08%) | $33,387.51 (+19.24%) |
The lump sum investment approach worked better for ARKK, even though the returns were negative. The investor was able to get more units of the ETF and therefore, more dividends for the same comparison period using the lump sum approach compared to the DCA approach.
The lump sum approach works well if the underlying instrument trends strongly upwards like the price action observed in 2020 on ARKK. However, if the investor uses the DCA approach in a up trending market, they would have little opportunity to buy more units or lower their average price.
However, if we look at the price action for the STI ETF, it’s not hard to see why the DCA approach worked better. The STI ETF was generally in a sideways trend for most periods, though it gradually climbed higher over the last two years. This allowed the investor who used the DCA approach to accumulate more units of the STI ETF at a lower average price than the lump sum approach.
Therefore, we should not discount any instrument based on its trend alone. By using the right investment approach, we could reap the best possible return regardless of the market conditions.
Editor’s Note: Prices are reflective as of 29 April 2022 and do not take into account the exchange rate or withholding tax for the dividends received for ARK Innovation ETF.
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