One of the hottest and most popular topics you’ll find on the internet is artificial intelligence (AI). The buzz around AI is not merely a fleeting trend; it’s a testament to this technology’s awe-inspiring advancements and ever-growing applications, which have captured the imagination of entrepreneurs, researchers, and investors alike.
As AI continues to reshape industries and redefine how we live, work, and play, the investment community has quickly recognized the enormous potential for growth and wealth creation in this space. For those eager to explore this dynamic domain, this investing in artificial intelligence ETFs guide offers an invaluable starting point.
Key Takeaways
- Understand the basics of AI and its potential market growth, which is projected to reach $1.81 trillion by 2030 with a CAGR of 38.1% from 2022 to 2030.
- Choose an AI ETF that aligns with your investment goals and risk tolerance, considering factors such as expense ratio, liquidity, and diversification.
- Open a brokerage account and fund it with the desired investment amount, then place an order to buy the AI ETF.
- Monitor the performance of your AI ETF investment regularly and adjust your strategy as needed to stay on track toward your financial goals.
- Top 5 AI ETFs to consider investing in: Global X Robotics & Artificial Intelligence ETF (BOTZ), iShares Robotics and Artificial Intelligence Multisector ETF (IRBO), ARK Autonomous Technology & Robotics ETF (ARKQ), Robo Global Robotics and Automation ETF (ROBO), and First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT).
Overview of AI and ETFs
Even if you’re familiar with AI and ETFs, beginning with a brief overview of these critical concepts for better understanding and recall will be best.
Artificial Intelligence (AI) refers to developing computer systems capable of performing tasks that typically require human intelligence. This includes learning, reasoning, problem-solving, perception, and natural language understanding.
AI technologies encompass various subfields, including machine learning, deep learning, computer vision, natural language processing, and robotics.
Exchange Traded Funds (ETFs) is an investment vehicle that pools together a diversified basket of assets, such as stocks, bonds, or commodities, and trades on a stock exchange like a single security.
ETFs offer investors a cost-effective, transparent, and flexible way to gain exposure to a specific market, sector, or investment strategy. They are particularly appealing to investors looking for diversification, as they provide a convenient means of accessing a broad array of assets with a single transaction.
Top 5 Ways to Invest in AI ETFs
Like other investments, AI ETFs require careful research, planning, and consideration before making decisions. Here are five ways to invest in AI ETFs:
- Understand the AI Basic and Its Potential Market Growth
Before you put your money in AI ETFs, it will help to understand the basics of what you’re investing in — AI in this case. When you completely understand the investment, you have the edge to see if it has growth potential, which helps you make better decisions. The AI basic includes its subset, such as machine learning, deep learning, natural language processing, computer vision, and robotics.
However, there are four types of AI, which are also subdivided into narrow and general AI. Narrow or weak AI is designed to perform specific tasks, such as virtual assistants, recommendation systems, and fraud detection. General AI, or Strong AI, is designed to perform any intellectual task a human can.
Emphatically, the four types of AI are:
- Reactive Machines: AI systems that respond solely based on specific input without considering prior experiences or memory.
- Limited Memory Machines: AI systems that possess a temporary memory, enabling them to learn from historical data and experiences over a short period.
- Theory of Mind: The ability of an AI system to understand and interpret human emotions, intentions, and beliefs.
- Self-Awareness: The development of systems that possess consciousness, introspection, and self-recognition.
According to various sources, the artificial intelligence market is expected to continue its robust growth in 2023. The global AI market size was $119.78 billion in 2022 and is expected to reach $1.81 trillion by 2030 with a registered CAGR of 38.1% from 2022 to 2030.
Spending by governments and businesses on AI technology is projected to top $500 billion worldwide in 2023. The AI market share in the United States is expected to value $190.61 billion by 2025. So, understanding the basics of AI is essential, and you can use the market trend opportunity to exploit the market to your advantage.
- Choose an AI ETF that Aligns with Your Investment Goals and Risk Tolerance
When investing in AI ETFs, choosing an AI ETF that aligns with your investment goals and risk tolerance is essential. This means understanding how much risk you can take and what combination of assets you need to invest in to achieve your goal.
For instance, you need to examine the fund’s essentials, such as the following:
- Expense Ratio, which compares the management fees and operating expenses of various AI ETFs to ensure you’re selecting a cost-effective option that will maintain your returns.
- Liquidity assesses the ETF’s trading volume and bid-ask spread to gauge its liquidity. A highly liquid ETF enables easier buying and selling at a fair market price.
- Diversification helps review the ETF’s holdings to determine the degree of diversification it offers. A well-diversified AI ETF can help mitigate risks and provide exposure to various sub-sectors within the AI market.
One example of an ETF that invests in companies is Global X Robotics & Artificial Intelligence ETF (BOTZ). You can consider investing in this AI ETF. This ETF allows you to diversify your investment across different forms of AI, including robotics, automation, and autonomous driving.
Moreover, the expense ratio is among the least, at 0.68% charges. Robots and automation are standard AI tools used in health, commercial, and other industries, which makes this ETF an easy-to-transact investment.
- Open a Brokerage Account and Fund It with the Desired Amount of Investment
If you’ve decided on the AI ETF you want to invest in, the next step is to open a brokerage account and fund it with the desired investment amount. This is a critical step that requires careful consideration to ensure you select the right brokerage and investment amount for your financial goals.
Opening a brokerage account is a straightforward process that can be completed online in just a few steps. The first step is to research and compare different brokerage platforms to find one that meets your needs. Look for a brokerage that offers access to the AI ETF you’re interested in, low fees, and a user-friendly platform you’re comfortable using.
Once you’ve selected a brokerage, you can open an account by providing your personal information and completing any necessary forms. Some brokerages may require you to provide additional information, such as your employment status, investment experience, and risk tolerance.
After opening your brokerage account, you must fund it with the desired investment amount. You can transfer funds from your bank account to your brokerage account using electronic funds transfer (EFT) or wire transfer. Some brokerages also allow you to fund your account using a credit or debit card.
When funding your brokerage account, invest an amount that aligns with your financial goals and risk tolerance. Consider factors such as your investment horizon, target returns, and the potential risks of investing in AI ETFs. You can diversify your investments by investing in multiple AI ETFs to spread risk across different sectors and regions.
- Place an Order to Buy the AI ETF
After you’ve chosen and registered with the broker firm that can convince you, the next thing is to login into the account and search for the desired AI ETF. Although this stage will present another consideration by reviewing the current price of the ETF and ensuring that it aligns with your investment strategy and risk tolerance before you place an order.
The next action is deciding how many shares of AI you want to buy at a price. For example, you’ll pay US$5,000 should each share cost US$250 if you’re buying 20 shares. Then, you can decide on using market orders or limit orders as the type you want.
- Market orders are executed immediately at the current market price.
- Limit orders are executed only when the ETF’s price reaches a specified limit. This allows you to set a maximum price that you’re willing to pay for the ETF.
After setting the order type, you can confirm that all the information you’ve entered is accurate and review any fees associated with the order. Once satisfied, click the ‘Buy’ button to submit your order.
- Monitor the Performance and Adjust the AI ETF Investment Strategy as Needed
After investing in your choice of AI ETF, monitoring its performance regularly and adjusting your investment strategy as needed is essential. This will help you stay on track toward your financial goals and take advantage of market changes or opportunities.
For instance, you can compare the AI ETF with other types of ETF to see which is performing well. Monitoring helps you to rebalance your portfolio and make necessary adjustments based on the performance of the ETF and market trends.
Top 5 AI ETFs to Invest In
As the AI industry continues to grow and evolve, there are several ETFs that investors can consider to gain exposure to this exciting sector. Here are the top 5 AI ETFs to invest in:
- Global X Robotics & Artificial Intelligence ETF (BOTZ)
This ETF seeks to track the performance of companies that could benefit from the increased adoption of robotics and artificial intelligence. It includes companies across various sectors, including healthcare, manufacturing, and technology.
- iShares Robotics and Artificial Intelligence Multisector ETF (IRBO)
This ETF seeks to track the investment results of an index composed of companies in the robotics and AI industry. The fund includes companies across various market capitalizations and regions.
- ARK Autonomous Technology & Robotics ETF (ARKQ)
This ETF focuses on companies leading the way in autonomous technology and robotics, including companies involved in automation, 3D printing, and energy storage.
- Robo Global Robotics and Automation ETF (ROBO)
This ETF invests in companies involved in producing, designing, or distributing products or services related to robotics and automation. It includes companies across various sectors, including healthcare, industrials, and technology.
- First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT)
This ETF seeks to track the performance of companies involved in developing and implementing artificial intelligence and robotics. It includes companies across various sectors, including technology, healthcare, and industries.
Conclusion
Investing in AI ETFs can be a great way to gain exposure to the growing AI market while minimizing risk through diversification. By following these steps, investors can make informed decisions and benefit from the growth of the AI industry. When investing in AI ETFs, you must research and evaluate each fund’s underlying holdings, fees, and historical performance. Consult with a financial advisor if you need personalized guidance on how to build a diversified AI ETF portfolio tailored to your financial goals and risk tolerance.
