All About Asset Allocation
by Richard Ferri is not a new book - the second edition was published in 2010. The author advocates a healthy split between equities and fixed-income, together with consistent rebalancing. It discourages too much stock picking
, in case we are fooled by randomness.
In other words, Cathie Wood and all of her Ark Invest funds run afoul of almost all asset allocation rules from the book.
Few fund managers have drawn more recent ire (or infamy) than Catherine Wood of Ark Invest. She is all about investing in a world to come. You will not hear her preach Costco ($COST
) or, god forbid, Saudi Aramco. Ark Invest envisages grocery delivery via drones and a fossil-free future.
And so Wood's ETFs have all underperformed by a large margin since markets rotated out of growth. Peak to trough, her flagship fund ARK Innovation ETF ($ARKK
) fell from $150+ per share (reached in early 2021) to the current $30 range. Both Costco and Saudi Aramco have held up much better than her funds over the same period.
To no surprise, Catherine Wood is staying the course. She will not be switching into Coca Cola ($KO
) or fixed income anytime soon. Her stomach for risk is evident as she continues to average down in this bear market. Many have accused Wood of mismanagement and irresponsibility with such an extreme skew in asset allocation.
As individual investors, however, capital allocation is up to us and within our control. Not everyone has balls (or collects a fixed percentage of management fee based on assets under management) like Cathie Wood. Investors are often encouraged to hold diversified funds that invest across multiple industries, asset classes, and geographies.