- Ark Invest's flagship ETF has experienced a 58% decline from its record high in the past year.
- But Cathie Wood is sticking by her strategy, and remains bullish on long-term for her holdings.
- This is the advice Wood game to her underwater investors in an interview with ETF Trends.
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Ark Invest's flagship ETF is in the midst of its worst drawdown since inception, falling as much as 58% from its record high.
That pain has led to a continued decline in assets under management for ARK Invest, with the Disruptive Innovation ETF seeing its assets cut in half over the past year. But in an interview with ETF Trends on Friday, Cathie Wood gave some advice to the investors who have lost money in her strategy.
"We have never underperformed the market on a rolling three-year point of view," Wood said, stressing the importance of taking a long-term view for her portfolio holdings. Wood has often stressed that Ark Invest takes a five-year outlook when it makes investments.
But with such a steep sell-off in Ark Invest's holdings amid a period of rising inflation and a hawkish Fed, Wood expects a sharp rebound to unfold.
"What this means is that this rubber band has been stretched so tightly, that we believe, and consider the source, but we truly believe given the valuations in our portfolio, the growth in the portfolio, and the fact that we're probably looking at very choppy waters from a cyclical point of view so that our secular growers are going to shine," Wood said.
Investors should take advantage of the potential for a sharp rebound in Ark's strategies, according to Wood.
"I certainly would be using this downdraft to increase that allocation [to ARK funds], because if anything during the last year, and it is quite a year for me to be saying this, if anything our conviction in how rapidly the world is going to change and how transformative these technologies will be as they converge and feed one another, our conviction in that outlook has increased dramatically," Wood said.
According to Wood, it's crucial that investors avoid making emotional investment decisions, as that can be catastrophic to their portfolio performance. Instead, investors can improve performance by averaging down, according to Wood.
"It doesn't feel good maybe as you're doing it, but you would be shocked how little it takes if you're consistent and you just keep averaging down," Wood said.
Wood added that the undervaluation in Ark's portfolio holdings "has reached an extreme I've never experienced in my career." Wood began her investment career in the late 1970's.
As an example, Wood pointed to Tesla and the amount of skepticism the company faced for years until it soared from $35 to $1,000 in a short period of time.
"It was a major surprise to some people and it was because they didn't understand the story. We feel that is a theme that's going to play out again and again and again, in our portfolios," Wood said.
As for some of the top holdings in ARK's portfolio, like Teledoc, Roku, and Zoom Video, "they are ready like a coiled spring," Wood said.