Have you ever invested in something at the absolute peak of its value, only to watch it plummet within a few months time? Well then, top of the ARKK to you my fellow novice investor! I imagine many others are feeling a similar pain as a result of the inevitable and ongoing correction of our beloved growth stocks. Let me share with you, friends, some good old fashioned loss porn.

As I casually mentioned in a breakdown of my asset allocation back in February, I invested a not-insignificant amount of money (for me) in Cathie Wood’s sexy ARK funds at the height of the growth stock mania, amounting to about 3% of my portfolio at the time. After a month of meme stock speculating, I conceded that I couldn’t pick these growth needles out of the haystack myself. Why not entrust the hottest ETF in the investing world to scratch that speculative itch for me? ARK, and it’s signature fund ARKK, were the answer to my speculative question. Yes, the very fund that I had dismissed months earlier due to their already unprecedented gains.

Investing in ARK funds at the top

FOMO can make a maniac out of any of us. I’ve courageously fought the battle with FOMO throughout the last year and a half–a period of time in which valuations haven’t mattered and prices kept going up. After dabbling in a few riskier bets on my own accord, I decided, with confidence, that paying a 0.75% expense ratio (and I hate fees!) for an ETF that had more than doubled in the last year was the more practical choice. The results have been, well, predictable.

I bought ARKK and its sister funds at very nearly the absolute peak. ARKK, which I purchased at over $150 per share, is currently back where it probably belongs under $100. This 35%+ loss comes at a time when the broader market overall has returned nearly 20% in the calendar year. Not, as they say, ideal.

There’s a reason that investors who buy at the top tend to sell at what turns out being the bottom (I am under no illusions that this is the bottom in ARK’s case). It’s mental warfare. Watching your hard-earned cash whither away and doing nothing about it is a counterintuitive exercise, regardless of the original time horizon. You sell because you don’t want to be reminded of it anymore, even if you intuitively know that you should hang on. Though for the moment it is merely a paper loss and very much comes with the territory when investing in growth stocks, it’s still painful.

Real, tangible pain.

Hello ARKness my old friend

Fortunately, I didn’t sell any stock or liquidate any other assets to hop aboard the ARKK. This was newly invested money, so the only real losses–however substantial they could turn out to be–are in the opportunity cost of investing elsewhere. That, and also all of the actual money that I’ve lost in the funds.

So much of investing is about psychology more than it is finances. Is it worth the stress to deviate from my usual auto-pilot style of investing? Clearly, for me, that answer is no. That answer always HAS been no. But this lesson needs constant reinforcement, and in some cases a new mistake to help illustrate the point.

In my situation, my ARKK-topping investment is more of an ego blow than a blow to my retirement. ARK was so obviously over-inflated that it stood out even among the rest of the growth pack at the beginning of the year. And yet, I couldn’t help myself but to pile on rather than miss out on the continuance of those unprecedented gains.

Zooming out a bit, my ARK investment currently stands as one of the worst investment decisions of my life. And the biggest reason for this is that it was a decision. The whole point of my investment portfolio is to not have to make decisions. With ARKK, I went against my tried-and-true philosophy–which is recognizing that I’m an idiot and that I have virtually no chance of outperforming the market–and fell flat on my face. There’s a reason that I and many others are such VTSAX truthers.

Re-balancing the old fashioned way

Want to know the nice thing about investing a little too much into a fund that loses money? It accounts for a lot less of my asset allocation now than it did when I invested! While ARKK was busy losing value, the overall market has performed well. As such, I’ve gotten a free re-balance of my portfolio to an amount that I’m more comfortable with. It always pays to be an optimist.

Not like anyone could have ever predicted this type of performance. Here’s my take from 10 months ago:

I plan to hold onto these volatile funds for a minimum of 5-10 years, though my hands have proven to be more paper than diamond in the past. The experiment will likely only serve to reinforce the beauty of indexing and provide proof yet again of my own stock picking incompetence. Or hey, maybe it will provide me with a small acceleration in my retirement accounts. The bottom line is that these funds are very risky and past performance (and mainstream recognition) may actually hinder future growth, and generally speaking I wouldn’t recommend them (especially with a 0.75% expense ratio!). But for me, it felt like a grown-up way to chase meme stocks without chasing meme stocks—by having someone else chase them for me.  

Do I wish that I simply stuck to the index funds and avoided this stain on my investing resume. Sure. But for whatever reason I seem to need these brushes with risk every now and again. I’ll chalk it up to a small tax that I to pay in order to continue investing in a total market index fund, experiencing eventual long-term gains that, in my ignorance, I never could have dreamt.

Buy or sell ARKK?

Where do I go from here? When I bought these funds, I approached my investment with the same set-and-forget mindset that I approach buying VTSAX. Because buying a fund that includes more than 3,500 well-diversified U.S. stocks is exactly the same as a highly speculative fund consisting of 30-some “innovative” companies. Nonetheless, I’m sticking with this approach, with the plan to re-evaluate in a few years. In the meantime, it will continue to be a rocky ride that has no guarantee of smoothing out any time soon.

Look, I have no idea what’s going to happen with these funds a year from now or five years from now. Even if it turns out to be a great investment in the long run (emphasis on long), I already know that it was a bad investment decision solely based on the fact that it was more money than I felt comfortable risking. That’s true regardless of where it goes from here.

As a personal finance blogger of sorts, I simply felt due for a confession. I bought ARKK at the top, and I’ll try not to sell at the bottom.