RISKY stocks are getting pummelled, but Cathie Wood’s loyal followers just can’t stop buying the dip.

       Retail investors continue to flock to Wood’s Ark Innovation ETF, which has brought in some US$718mil (RM3bil) in net inflows in the past month.

       As Bloomberg Intelligence’s Eric Balchunas noted Thursday, that puts the exchange-traded fund among the top US funds.

       So much for investors seeking safety in the face of war.

       Ark’s enduring popularity may be the strongest example of how much the Covid-19 melt-up has reconditioned investors.

       No doubt, the college kids buying Ark on their Robinhood apps have seen the 62% decline since February 2021 and concluded the fund is due for a bounce.

       Investing’s never that easy, though, and it’s an unusual time to go long on an extraordinarily speculative portfolio given a war in Ukraine and a generational oil shock.

       Russia’s bloody invasion of Ukraine could carry on for months; commodities prices could rise ever higher; and stagflation could strike economies that haven’t experienced it since the 1970s.

       The soaring price of petrol will do enough damage to consumer demand for other things, and the US economy certainly doesn’t need its young adults losing all their rent money in the stock market.As DataTrek Research’s Jessica Rabe noted this week, the Ark Innovation ETF’s performance since its February 2021 peak is starting to look eerily similar to the Nasdaq Composite Index during the deflation of the dotCom bubble.

       Of course, the Nasdaq wasn’t done a year into the selloff.

       All told, the decline would reach about 78% from peak to trough.

       The connection could well prove spurious, but if the comparison holds, Ark hasn’t come close to its bottom.

       There were a couple of Nasdaq bounces along the way – including one around day 280 – but that’s a tough trade for the amateurs to nail.

       In his note Thursday, Bloomberg’s Balchunas wrote that Wood’s fund is being rewarded for her conviction.

       In the face of a volatile market, she has stuck with stocks including Tesla Inc, Roku Inc and a host of speculative bets backed by exciting ideas and much less exciting profits, if any at all.

       As Balchunas noted, conviction “can be imperative for an ETF’s survival, allowing investors to trade around it.”

       Wood would have lost followers if she had turned away from her core brand and become defensive.To be clear, Wood’s strategy could work out fine in the long run, but she and her adherents are in for a world of volatility.

       I now understand why many managers prefer to do this kind of investing in the comfort of venture capital, where money is committed for the life of a fund and they don’t have to deal with the highly imperfect daily referendum on valuation that is the stock market.

       But when retail investors are piling into some of the riskiest stocks on the planet during a period of chaos, it’s probably just another sign that something is terribly amiss in this market. — Bloomberg

       Jonathan Levin writes for Bloomberg. The views expressed here are the writer’s own