Say Hello To Artificial Intelligent ETFs

By David Fabian

A computer that functions with the speed and intellect of a human without all the underlying emotion. Scientists and technology experts have spent decades working to develop this next innovative leap with mixed results. While some may argue that we aren’t all the way there yet, it should come as no surprise that investors can apply these themes directly in their portfolio using exchange-traded funds.

There are really two ways to accomplish this feat: 1) invest in companies that are working on artificial intelligence and robotics projects or 2) use intelligent algorithms to select stocks for you.

The former is best encapsulated by two rising stars in the ETF field. The ROBO Global Robotics and Automation Index ETF (ROBO) and Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ). Both funds recently surpassed $2.3 billion in total assets (each) after an earth-shattering run in 2017 that saw BOTZ gain +58% and ROBO jump +44.26%.

The funds share the similar goal of investing in a small group of publicly-traded stocks from around the globe focused on robotics or highly advanced computer integration. ROBO contains 89 underlying holdings with a total expense ratio of 0.95%. BOTZ takes a more concentrated approach be selecting just 29 high growth companies to makeup its portfolio.

The obvious diversification complexities between the two funds allow for ROBO to capture a wider swath of stocks with more capital spread among the individual holdings. Conversely, BOTZ is highly focused on its top ten holdings with a significant emphasis on exposure to Japan. The distinct difference between the two indexes is why there will likely be a significant performance divergence over long time frames.