How to invest in artificial intelligence ETFs
Investing in Artificial Intelligence (AI) Exchange-Traded Funds (ETFs) can be an exciting opportunity for individuals looking to gain exposure to the rapidly growing AI industry. AI ETFs are designed to track the performance of a basket of companies engaged in various AI-related activities, including research, development, and application of AI technologies.
Artificial intelligence (AI) is one of the most disruptive technologies of our time, and it is poised to revolutionize many industries. As a result, there is growing interest among investors in getting exposure to AI-related companies.
One way to do this is to invest in AI exchange-traded funds (ETFs). ETFs are baskets of stocks that track a particular index or sector, and they offer a number of advantages over individual stocks, including diversification, low costs, and liquidity.
There are a number of AI ETFs available to investors, each with its own unique focus. Some ETFs focus on specific subsectors of AI, such as robotics or natural language processing. Others track a broader range of AI-related companies.
When choosing an AI ETF, it is important to consider your investment goals and risk tolerance. If you are looking for a long-term investment with the potential for high growth, then a broad-based AI ETF may be a good option. However, if you are more risk-averse, then you may want to consider an ETF that focuses on a specific subsector of AI.
This guide will walk you through the steps to invest in AI ETFs and highlight key considerations to make the most informed decisions.
Step 1: Educate Yourself about AI ETFs
Before diving into AI ETF investments, it’s essential to understand what ETFs are and how they work. An ETF is a type of investment fund that trades on stock exchanges, similar to individual stocks. AI ETFs typically invest in a diversified portfolio of AI-related companies, reducing individual stock risk and providing exposure to the overall AI market.
Step 2: Research and Select an AI ETF
There are several AI ETFs available, each with its own investment strategy, expense ratio, and portfolio composition. Conduct thorough research to identify the AI ETF that aligns with your investment goals and risk tolerance. Some well-known AI ETFs include:
- Global X Robotics & Artificial Intelligence ETF (BOTZ)
- ARK Autonomous Technology & Robotics ETF (ARKQ)
- iShares Robotics and Artificial Intelligence ETF (IRBO)
- First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
Step 3: Evaluate the ETF’s Holdings
Once you’ve selected a potential AI ETF, review its holdings. Look for companies that are at the forefront of AI technology and have the potential for sustained growth. Consider the geographic distribution of the holdings and whether the ETF is focused on specific AI sub-sectors, such as robotics, machine learning, or natural language processing.
Step 4: Understand Expense Ratios and Fees
ETFs charge an annual expense ratio, which represents the percentage of your investment that goes towards covering the fund’s operational expenses. Compare the expense ratios of different AI ETFs to choose a cost-effective option that maximizes your returns.
Step 5: Open an Investment Account
To invest in AI ETFs, you’ll need a brokerage account. Choose a reputable online brokerage that offers access to a wide range of ETFs and suits your trading preferences. Ensure the brokerage account supports ETF trading with low or no commission fees.
Step 6: Allocate Funds and Make Your Investment
After funding your brokerage account, decide how much of your portfolio you want to allocate to AI ETFs. Diversification is key, so avoid putting all your investment into a single ETF. Instead, consider spreading your investment across different sectors and asset classes to minimize risk.
Step 7: Monitor Your Investment
Once you’ve invested in AI ETFs, regularly monitor their performance and stay updated on industry trends and news. Economic and technological developments can significantly impact the AI sector, so it’s essential to stay informed and adjust your investment strategy accordingly.
Best AI ETFs to buy in 2023
Here are some of the best AI ETFs to consider:
Global X Robotics and Artificial Intelligence ETF (BOTZ)
- Ticker Symbol: BOTZ
- Objective: Seeks to invest in companies that are involved in the development and usage of AI, robotics, and automation.
- Key Holdings: Companies engaged in industrial robotics, automation solutions, AI software, and hardware.
- Expense Ratio: Approximately 0.68% (subject to change).
ARK Autonomous Technology & Robotics ETF (ARKQ):
- Ticker Symbol: ARKQ
- Objective: Aims to invest in companies that are leading the way in autonomous technology, including AI, robotics, and mobility.
- Key Holdings: Companies involved in autonomous vehicles, robotics, 3D printing, and more.
- Expense Ratio: Approximately 0.75% (subject to change).
iShares Robotics and Artificial Intelligence ETF (IRBO):
- Ticker Symbol: IRBO
- Objective: Seeks to track the investment results of an index composed of companies in the AI and robotics sectors.
- Key Holdings: Companies engaged in robotics, automation, AI software, and hardware.
- Expense Ratio: Approximately 0.47% (subject to change).
First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT):
- Ticker Symbol: ROBT
- Objective: Aims to track the investment results of an index that focuses on companies engaged in AI and robotics.
- Key Holdings: Companies involved in AI research, development, and applications across various industries.
- Expense Ratio: Approximately 0.65% (subject to change).
WisdomTree Artificial Intelligence ETF (AIQ):
- Ticker Symbol: AIQ
- Objective: Seeks to track the price and yield performance of an index that includes companies with AI-related businesses.
- Key Holdings: Companies involved in AI technology and its applications in diverse sectors.
- Expense Ratio: Approximately 0.95% (subject to change).
Once you have chosen an AI ETF, you can purchase it through a brokerage account. The fees associated with AI ETFs vary, but they are generally lower than the fees associated with individual stocks.
Investing in AI ETFs is a great way to get exposure to this exciting and rapidly growing technology. However, it is important to do your research and understand the risks involved before you invest.
Investing in AI ETFs offers an opportunity to participate in the growth of the AI industry without the need for in-depth knowledge of individual AI companies. However, like all investments, it comes with inherent risks, and past performance is not indicative of future results. It is crucial to do your due diligence, understand your risk tolerance, and invest for the long term. Consider consulting a financial advisor to ensure your investment strategy aligns with your overall financial goals and risk appetite. Happy investing!