As AI continues to shape the future of almost every industry, investors are looking to get a piece of the pie. Learn how to choose the best AI ETF investment fund in 2021.
As the global artificial intelligence (AI) market continues to reach into the multi billions of dollars, more and more people are looking for ways to take advantage of its growth and claim a slice of the AI pie for themselves. One popular way people are doing that is through investing. By investing in companies that are innovating in the AI space, investors can reap the rewards when those companies do well in the market. But investing can be tricky, which is why we’re going to go over the best AI ETF options to look into in 2021.
First, it’s important to understand what an ETF is, and the benefits they can provide over traditional stock investing strategies.
What is an AI ETF?
To understand AI ETFs, we have to start with ETFs in general. Exchange-traded funds, or ETFs, are a kind of investment fund that blend together the diversification of mutual funds with the ease of trading that traditional stocks bring to the table. Like stocks, they can be traded anytime, and can include a variety of assets, such as stocks, bonds, currencies, and more. An AI ETF, then, is an exchange-traded fund that specifically deals with stocks and other assets from businesses innovating in the AI space.
The benefit of investing in an AI ETF is that, as an investor, you’ll gain access to a diverse portfolio of AI-related assets. The more diverse your investing portfolio is, the less risk you’ll assume, which is great if you’re looking to get a good ROI in the long-term. If you were to only invest in individual AI stocks, you’d likely assume more risk due to the inherent volatility of the AI market. Many companies innovating in the AI space today are small, and their products often won’t make it to market. By investing in companies of various sizes, you’ll reduce your risk while helping these brands continue to develop new technologies.
Why invest in artificial intelligence?
Practically every industry has been shaped by artificial intelligence over the past decade. From healthcare to finance and everything in between, AI represents an incredibly huge and diverse array of technologies that are creating new ways of living and working every day. While traditional AI is often characterized as robots mimicking human thought and speech, real AI applications range from simple customer service chatbots to complex deep learning algorithms that help organize and analyze vast amounts of data. What’s more, these applications continue to grow in size, scale, and ability each year, making AI an incredibly dynamic space.
Artificial intelligence technologies will only continue to disrupt industries, helping them evolve to better meet today’s standards of efficiency, productivity, ethics, and more. This constant state of evolution and many diverse applications make AI a great area of tech to invest in. Below are some of the best AI ETFs to consider investing in in 2021.
Top AI ETFs to look into in 2021
VGT - Vanguard Information Technology ETF
The Vanguard Information Technology ETF boasts over $43 billion spread out over 328 individual holdings with an expense ratio of 0.10%. This fund focuses on pure tech, covering a range of companies like Apple, NVIDIA, Intel, Adobe, and more, excluding fields like healthcare and telecommunications. If you want to focus solely on tech, this is a great AI ETF to get in on.
ROBO - Global Robotics and Automation Index ETF
The smaller ROBO ETF holds 84 different stocks and has an expense ratio of 0.95%. The fund’s mission is to invest solely in "transformative innovations in robotics, automation, and artificial intelligence”. While no single stock holds more than 2% of the entire fund’s value, some of the largest holdings include ServiceNow, Kardex Holding, and Harmonic Drive Systems. This fund invests in a variety of global companies, including tech companies from Japan and Switzerland.
ARKQ - ARK Autonomous Technology & Robotics ETF
Another famous AI ETF is managed by ARK Funds, which holds a lower liquidity than the others listed above at around $600 million in assets. It carries an expense ratio of 0.75%. ARKQ invests in global companies that will likely benefit the most from advances in artificial intelligence and automation in the form of autonomous driving, 3D printing, energy storage, and more. Big players include Apple and Tesla, along with more industry-specific brands like John Deere.
IRBO - iShares Robotics and Artificial Intelligence Multisector ETF
With a modest $150.2 million of assets and a relatively low expense ratio of 0.47% under its belt, IRBO is a great choice if you’re a new investor looking to diversify your portfolio with more tech offerings. Focusing on robotics developers, robotics enablers, AI developers and AI enablers, this fund invests in a variety of global players in the AI space, including China-based Baidu and San Francisco-based Splunk. If you’re looking for a purely AI-based ETF, this one might not be the right choice, as it does hold stock in telecommunications. However, the low expense ratio is hard to beat.
QQQ – Invesco QQQ
One of the most popular and well known AI ETFs, QQQ holds over $125 billion in assets and has an expense ratio of 0.20%. While known for tracking the NASDAQ-100 Index, which isn’t often considered among AI funds, most of the NASDAQ-100’s holdings do actually fall into the tech category, making it easy for investors to get exposure to a variety of big players in the AI field. From Apple and Microsoft to Tesla and Adobe, QQQ is a great pick for those looking to invest in a broad range of all-American companies.
As artificial intelligence continues to grow in size and scope, it will become much more important for savvy investors to take advantage of AI ETFs to grow and diversify their tech portfolios. And when choosing the best AI ETF for you, it will ultimately come down to which particular companies you want to invest in and whether or not they’re high performers. Don’t forget to take into account each fund’s expense ratio, dividend yield, and past performance as well in order to select the best choice for your risk appetite.