As artificial intelligence (AI) continues to revolutionize industries worldwide, AI ETFs (Exchange-Traded Funds) have emerged as a compelling investment avenue for those looking to tap into the growth potential of this cutting-edge technology. AI ETFs offer investors a unique opportunity to diversify their portfolios with exposure to global AI innovations.
This article looks into what AI ETFs are, explores their types, highlights the best performers of 2024, and explains why these ETFs stand out.
What are AI ETFs?
AI ETFs are exchange-traded funds that primarily invest in companies involved in the research, development, and utilization of artificial intelligence technologies. These ETFs provide investors with an efficient way to gain exposure to the AI sector, encompassing everything from software developers and hardware manufacturers to firms utilizing AI for healthcare, finance, and autonomous vehicles.
AI ETFs track a basket of companies involved in developing or utilizing artificial intelligence technologies. By investing in an AI ETF, you gain diversified exposure to the potential growth of the AI sector without the risk of picking individual stocks.
Types of AI ETFs
There are various types of AI ETFs, each offering different investment approaches:
- Thematic AI ETFs : Focus on specific AI sub-sectors like robotics, machine learning, or natural language processing.
- Broad AI ETFs : Track a wider range of companies across the entire AI landscape.
- Global AI ETFs : Invest in companies around the world involved in AI.
- Active AI ETFs : Managed by portfolio managers who actively select and weight holdings based on their expertise.
- Passive AI ETFs : Track a predetermined index, offering lower fees but less flexibility.
Stay ahead in forex CFDs trading with Skilling. Sign up now to trade with up-to-date insights on world currencies and their movements.
Best AI ETFs 2024 by performance (as of February 6, 2024)
| Rank | ETF Ticker | Year-to-date Return |
|---|---|---|
| 1 | LARK AI Autonomous Driving & Robotics ETF (ARKG) | 34.5% |
| 2 | ROBO Global Robotics & Automation Index ETF (ROBO) | 28.2% |
| 3 | QRAFT AI-Enhanced US Large Cap ETF (QRIVE) | 27.1% |
| 4 | Global X Artificial Intelligence & Technology ETF (AIQ) | 24.8% |
| 5 | iShares Exponential Technology ETF (IGV) | 23.7% |
Why these are the best AI ETFs
These top performers have delivered strong returns in 2024, outpacing the broader market. Here's why they stand out:
- Targeted exposure : Each ETF offers focused exposure to specific AI sub-sectors with high growth potential.
- Diversification : They provide diversification across multiple AI companies, mitigating individual stock risk.
- Active management (for some) : Actively managed ETFs offer the potential for higher returns through expert selection.
- Performance : Their year-to-date returns significantly exceed the S&P 500's performance.
Remember: Past performance is not a guarantee of future results. Investing in AI ETFs carries inherent risks, and you should conduct thorough research before making any investment decisions.
Summary
AI ETFs represent a dynamic and forward-looking investment opportunity, especially as the world continues to witness the rapid advancement of artificial intelligence technologies. In 2024, these ETFs have gained prominence, offering investors around the globe a chance to participate in the growth of AI without having to pick individual stocks.
By investing in a diversified portfolio of AI-focused companies through ETFs, investors can mitigate some of the risks associated with the volatility of the tech sector while positioning themselves to benefit from the sector's long-term growth. As AI continues to infiltrate various industries, from healthcare to finance and beyond, AI ETFs stand out as a compelling investment strategy for those looking to tap into the next wave of technological innovation.
AI ETFs offer a compelling way to participate in the growth of artificial intelligence. By understanding their types, exploring top performers, and carefully considering your investment goals, you can make informed decisions to harness the potential of this revolutionary technology. Remember, diversification and risk management are crucial for any investment strategy.
FAQs
What risks are associated with investing in AI ETFs?
While AI ETFs offer significant growth potential, they also carry risks, including market volatility, regulatory changes affecting the tech sector, and the rapid pace of technological obsolescence. Investors should consider these factors and their risk tolerance before investing.
How can I evaluate the performance of an AI ETF?
Evaluating an AI ETF's performance involves looking at its historical returns, comparing its performance against relevant benchmarks, analyzing its holdings for diversity and growth potential, and considering the fund's expense ratio and management strategy.
How do AI ETFs fit into a balanced investment portfolio?
AI ETFs can add growth potential and diversification to a balanced portfolio, especially for investors looking to increase their exposure to the tech sector. However, due to their focus on a specific niche, they should complement, rather than replace, a well-rounded mix of asset classes.
Can AI ETFs offer dividends?
Yes, some AI ETFs may offer dividends, depending on the dividend policies of the companies within the ETF's portfolio. However, the primary focus of AI ETFs is typically capital appreciation rather than income generation.
What are the risks of investing in AI ETFs?
AI is a rapidly evolving field, and its future success is uncertain. These ETFs can be volatile, and their performance may not be consistent.
How do I choose the right AI ETF for me?
Consider your investment goals, risk tolerance, and desired level of exposure to specific AI sub-sectors.
Where can I buy AI ETFs?
Most online brokers offer access to a variety of AI ETFs.
