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Negative 8% that is what Cathie Wood's Ark Innovation ETF has returned year-over-year for the last 5 years. She just dumped Tesla and bought half a billion dollars of SpaceX on IPO day. That's crazy. And her investors have been losing money the entire time. During that same period the S&P 500 was up.
What? 11.8% per year. Same 5 years. I'm Rich, former Wall Street broker and today I'm going to explain exactly what Cathie Wood just did, why she did it and more importantly what it means for your money. That's really the only thing that matters. We don't care about her because the stock market doesn't reward people who follow the hype.
It rewards people who understand the math. So let's go. Welcome to the Leverage Report where we take stuff Wall Street doesn't want you to know and we hand it straight to you. Here's what happened this week. Cathie Wood's Ark Invest, one of the most followed investment funds in America, sold Tesla stock on the same day SpaceX went public.
She pulled 16 million out of Tesla and put 440 million into SpaceX on the very first day of trading and the headlines went crazy. Tesla dumped, SpaceX bought, Cathie's making her next big bet. So nobody in from these headlines mentioned from 2014 to 2024 the Ark Innovation ETF was the third biggest destroyer of investor wealth in the entire mutual fund and ETF universe.
Seven billion dollars gone. Morningstar's words, not mine. Seven billion. So before you follow the headline and buy whatever Ark is buying, stick with me because the story is always more interesting than it looks. All right, story time. When I was a broker on the floor we had a client I would like to call him Dave.
Dave was smart engineer. He owned his own house. He saved his entire career and Dave got obsessed with a hot fund manager. It happens. Everybody gets like some hot managers. The manager was on CNBC every morning talking about the future, AI robotics, electric vehicles before anyone knew what an EV was and Dave thought this guy sees what nobody else sees, so I'm all in.
Dave put a significant chunk of his retirement into that fund. And you know what happened? The fund had two great years. Then rates went up. The future got expensive and Dave watched 60% of that money disappear in 18 months. Dave called me and I told him what I'm about to tell you. The people who made money weren't the ones who followed the guru.
They were the ones who bought the boring index fund and went to their kids soccer game instead of watching CNBC. Horrible channel. No, only kidding. Dave didn't think that was funny. But 10 years later he thanked me because the boring fund actually did win. So, does this sound familiar? It should because Dave is Cathie Wood's investor and it's happening again right now.
So, who is Cathie Wood? She runs Ark Invest. She became famous famous kind of famous like YouTube famous, TikTok famous when Ark returned a 153% yield in one year. 153%. That's pretty good. I mean, I can understand that. Everyone lost their mind. She was on magazine covers. She had a cult following.
People were tattooing ARK logos. I'm not making it up. It's definitely true. It was on their bodies. The thesis was simple. Buy disruptive technology early and hold on. Tesla, Zoom, Roku, Coinbase, companies that were going to change the world. And here's the thing. The thesis wasn't crazy. Some of those those companies did change the world.
But here's what Cathie Wood forgot. The market doesn't just reward the right ideas. It rewards the right ideas at the right price and the right time. In 2020, when interest rates were zero and money was free, investors were willing to pay absolutely anything for future promise. Then rates went up. Suddenly those future promises had to compete with a 5% guaranteed return on a T-bill, Treasury bonds.
And the math changed everything. ARK fell 75% from its peak. 75%. People who bought at the top in 2021 still haven't recovered. And that five-year annualized return of negative 8%. Ooh, it's brutal. And that includes the monster 2020 run. The actual damage is worse than it looks. Now, Tesla. Cathie Wood has been one of Tesla's biggest cheerleaders.
She has a price target of $2,600 per share by 2029. The stock is sitting around 406 right now. But she just sold 16 million worth of it. And why? Because SpaceX went public and ARK needed cash to buy the biggest IPO in American history. SpaceX priced at 135 share, the valuation at 1. 75 trillion. It surged 19% on day one.
Arc bought 444 million worth. Now, here's what I want you to notice. Arc sold a company it says is going to 2,600 per share to buy a company that Morningstar says is already priced 55% above fair market share fair market value. That is not a rational trade. That is FOMO with a Bloomberg terminal. And by the way, SpaceX gave retail investors 30% of the float.
Three times the normal allocation. You know what that usually means? Wall Street doesn't want as much of it as everybody thinks. As a former broker, when I see company aggressively count retail investors in on an IPO, I get nervous. And that's not me being cynical. That's pattern recognition from a decade on the floor.
All right, the math moment. All right, here's the part of the video I want you to screenshot. Share it with somebody you care about. If you had put $10,000 in the Arc 5 years ago, you'd have roughly $6,700 today. You lost money. That doesn't make any sense. If you had put $10,000 into the S&P 500 index fund, VOO, or something else, okay, 5 years ago, you'd have roughly $17,600 today.
It's a big difference. You didn't need Cathie Wood. You didn't need Tesla calls. You didn't need a SpaceX IPO. You needed a boring index fund and the patience to just leave it alone. Leave it alone. Leave it alone. That gap, $6,700 versus $17,600 is the cost of following this guru. That's the real price of chasing the headline and feeling like you're in the mix.
You need that excitement, go to Atlantic City and spend $500 and get rid of it. I'm not here to trash Cathie. She's definitely brilliant. Her conviction is real, but conviction without validation and discipline is not investing. It's just a bet. And when you're betting with your retirement money, the house always wins.
Three moves to make this week. All right, here are the three moves that you should make this week. Move number one, check if you own ARK or any ARK ETF in your 401k or brokerage account. If you do, look at your cost basis, compare it to the S&P 500 over the same period. The math will tell you what to do.
Pretty simple at this point, right? Move two, if you're tempted to buy SpaceX IPO or any hot IPO, wait 90 days. Let the retail excitement settle. Let Let the lockup periods approach. The price almost always comes in. Patient money wins. Move three, pick one boring index fund, VOO, VXIAX, DTI, doesn't matter much.
Set up the automatic contribution monthly. Don't watch it. Go live your life. That move alone posts 90% of what ARK or beats with 90% of what ARK has done to its investors. I want to hear from you. Drop your biggest investing question in the comments right now. I read every single comment still. And if you want me to build a custom financial plan specifically for your situation based on what I think, you know, whatever, you can fill out the link in the profile.
Next week, I'm pulling back the curtain on the retirement number that's going to shock you. The average American headed into retirement is looking at $2,400 a month combined Social Security plus retirement savings. I'm going to show you exactly what that means, whether that's enough, and what you can do about it right now.
You don't want to miss out. If you learned something from this video or it helped YOU AT ALL, SUBSCRIBE. IT'S FREE AND UNLIKE ARKK's 5-year return, it definitely won't cost you money. I'm Rich. This is the Leverage Report. Peace.
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