The stock market has always been a realm of both tremendous success and devastating failure, making risk management a crucial component for investors. When it comes to new and trendy investment opportunities like artificial intelligence (AI), the stakes become even higher. While AI stocks have seen remarkable gains this year, they have also demonstrated significant volatility, making them a risky proposition for many investors.
One alternative strategy that offers a safer approach to AI investing is through exchange-traded funds (ETFs). These funds provide exposure to an entire sector of the stock market with the purchase of a single security, mitigating the risk associated with individual stock picks.
One notable AI-focused ETF is the Global X Robotics and Artificial Intelligence ETF (NASDAQ: BOTZ). This fund invests in companies that aim to benefit from long-term advancements in robotics and AI, covering various sectors including industrial automation and self-driving vehicles. While it holds just 44 stocks, it is heavily weighted towards its top five holdings, which may result in slightly higher volatility.
Among its holdings, the Global X BOTZ ETF features industry leaders such as Nvidia, while also including other promising AI names. Despite its slightly higher expense ratio, the fund has delivered solid returns, outperforming the S&P 500 index.
For investors with a lower risk tolerance, the iShares Robotics and Artificial Intelligence Multisector ETF (NYSEMKT: IRBO) presents an attractive option. This ETF is more diversified, holding 112 different stocks across the entire robotics and AI value chain. It offers exposure to chipmakers, software developers, and end users of AI, with a well-balanced portfolio that mitigates concentration risk.
Interestingly, the iShares IRBO ETF does not include the most popular AI names in its top holdings, keeping the portfolio well-diversified. With a lower expense ratio and comparable returns to the Global X BOTZ ETF, it presents an appealing choice for investors seeking controlled exposure to AI.
Both ETFs provide investors with the opportunity to tap into AI’s potential without betting solely on individual company success. By offering diversification and spreading the risk, these funds present a safer way to invest in the AI industry.
As with any investment, it is important for investors to conduct their own research and consider their risk tolerance and investment goals before making any decisions. AI continues to hold great promise and is expected to generate significant value in the years to come. By leveraging the benefits of ETFs, investors can navigate the potentially volatile AI market while minimizing their exposure to risk.
Disclaimer: The investment options mentioned in this article are meant for informational purposes only and should not be construed as financial advice. Investors should consult with a qualified financial professional before making any investment decisions.
