The emergence of artificial intelligence (AI) has been one of the most interesting parts of the global markets in recent years. As this technology has started to change our lives in various ways, we can see AI ETFs (exchange-traded funds) as a way to gain exposure to the sector.
We’ll be looking at what an AI ETF is and how to pick one that suits you. Find out how to identify the best AI ETFs and see how they work. Discover the benefits of trading them, as well as any risks to be aware of.
We'll also be looking at the top AI ETF funds and showing you how to trade them with ActivTrades.
What Is an AI ETF and How Does It Work?
AI ETFs are investment funds that give investors the opportunity to get involved in the sector without directly buying the stocks of individual companies that interest them. Instead, they can choose funds that gather a selection of AI-related stocks.
This gives the chance to diversify and include various stocks in a single investment. An artificial intelligence ETF is based on different stocks from the likes of technology, robotics, and cloud computing companies, each with an AI element to their work.
Choosing an AI stock ETF has become a popular approach for people who want exposure to the growing AI sector but prefer not to pick individual stocks. By looking at an artificial intelligence stocks ETF, they can bring together several companies in a single investment that gives them a chance to benefit from progress in the overall market.
Best AI ETF Picks for Traders
The performance of the top AI ETF funds varies according to factors such as market conditions. However, by looking at some of the top picks across various categories, we can see how it’s possible to select the best AI ETFs that meet your needs.
Broad AI ETFs
The Vanguard AI ETF and WisdomTree AI ETF are among the best examples of funds that look to track the general AI market. They typically cover a good selection of the sector’s leading companies, meaning that they provide the opportunity to take advantage of market growth.
If you’re looking to simply invest in AI without too much research, this is a solid option. You’ll automatically gain access to some of the biggest and best stocks in the sector, without having to investigate individual firms. This opens up the possibility of making gains from the broad progress of the AI sector without relying on a single company’s success.
Specialised AI ETFs
The Xtrackers Artificial Intelligence & Big Data UCITS ETF is a good example of the next category, as is the Global X robotics & Artificial Intelligence ETF. These are investment funds that have a closer focus on certain areas of AI, while still retaining the concept of including a basket of assets rather than a single stock.
The stocks might be based on big data firms, companies that offer AI agents, or other sectors. This type of ETF gives you the option of looking for a specific type of business that you feel will be among the biggest winners in the near future, or of simply identifying a trend that you believe has a strong future ahead.
Regional AI ETFs
The China AI ETF and other regional options may be the best choice if you want to narrow your focus to a certain part of the world. The AI revolution is a global phenomenon right now, but you might prefer to invest in a region where you feel the most progress will come from.
A regional AI ETF like this can be a good option if you don’t want to delve fully into the market and investigate all the companies that are making waves in that part of the world. Like the previous point, this is a way of achieving a specific focus on your investments without having to study the companies a lot.
Why Trade AI ETFs? Key Benefits and Risks
The artificial intelligence ETF list provides different ways of investing in the growth of AI, so what are the main benefits to be gained from doing this? Here are a few of the main benefits that are worth thinking about.
- Diversification: Rather than pinning all your hopes on a single company, entering an AI stock ETF spreads your investment over a more diverse selection of the sector’s leading names. This lets you take advantage of positive moves across the industry, which is a particularly important benefit in a relatively young and fast-moving sector like this.
- Exposure to innovative tech: AI is currently one of the leading technologies that’s expected to change the world. This means that many investors are keen to get involved, but not everyone has the time or experience needed to explore the market and uncover the best AI stocks by fully understanding the innovative tech in this sector.
- Liquidity: Investing in AI ETF funds also provides a benefit in terms of the greater liquidity they tend to offer, when compared to other types of investments. The largest AI ETFs make it easy for investors to cash out whenever they meet their targets or need access to their funds.
- Easy access to innovative tech: The world of artificial intelligence intrigues many traders, but not everyone feels ready to invest in this area. An AI focused ETF provides simple access to this area by letting you invest in the overall trend without the time-consuming aspects, such as reading company reports and looking into their profits.
What about the risks to bear in mind when looking at an AI ETF? There are a few areas that you should know about before making an informed decision.
- Market volatility: Like any emerging market, there is the risk of volatility when looking at AI ETFs. Many of the companies in this sector are relatively new, and their stock prices may vary widely while they attempt to introduce their ideas to the market. There’s also the risk that a particular company’s technology becomes obsolete due to emerging rivals and tech.
- Tech-sector dependency: While you may feel that an AI stock ETF is currently the best option, investing in a single market or industry always brings the risk of being overly dependent on it. It’s a good idea to diversify your investments so that you’re not dependent on a single sector.
- Cost ratios: Some artificial intelligence stocks ETFs may have high cost ratios that make it more difficult for investors to get a clear profit even when they perform reasonably well. It’s worth looking for funds that keep the cost as low as possible.
- Excessive choice: The rapid expansion of the AI market has led to numerous new companies springing up, which makes it difficult for newcomers to fully understand their options. Not every startup is going to succeed, making it vital that the right choices are made.
ActivTrades provides a cost-effective approach to investing in AI ETFs and other ETFs, with a wide selection of funds to choose from and low cost ratios. Signing up for an account only takes a moment and gives you access to a wide range of ETFS and other investment types.
Key Factors to Consider When Choosing the Best AI ETF
When looking at an ETF for AI stocks, there are several key factors to take into account. The expense ratio is one of them, since you want to ensure that the cost of the ETF doesn’t eat into your profits. A low cost ratio will boost your chances of taking away a profit from the investment.
The performance history is another important element, as this lets you see how much it has earned in the past. While it’s clear that past performance is never an indicator of future results, it’s still something worth looking at to see what trends you can identify.
By delving deeper, you’ll also find out that AI ETF stock is included, from sectors like robotics, machine learning, big data, and other AI fields. This gives you the option of then looking more closely at each sector or individual company that interests you, if you want to investigate further, there’s a lot of information online but it’s probably going to take a lot of time to get a feel for the full market, which is why focusing on a specific area is recommended.
The size and liquidity of the ETF show how easy it’s likely to be to withdraw your funds when you want to. You’ll feel more comfortable if you invest in an ETF that lets you access your money easily. Finally, check the different types of investment vehicles available to you. Some investors are simply looking to invest directly in an AI stock ETF, while others want to add leverage or have the option of going either long or short.
How to Trade AI ETFs with ActivTrades
Traders can access various AI ETFs through CFDs on ActivTrades. This approach includes benefits such as adding leverage and the ability to go long or short on the funds. There’s no need to own the underlying asset, but you should carry out a risk assessment before going ahead with any investment of this nature.
Start the process by signing up as a new user and adding funds to your account. You can then choose from our range of investment types, including AI ETFs.
FAQs – Best AI ETFs
How Do AI ETFs Work?
You simply choose the AI ETF that you like the look of. You can either directly buy a share of it, or else trade it by option for an investment vehicle like a CFD.
Are AI ETF Funds Short-Term or Long-Term Investments?
It depends on what type of investment or trading approach you take. You can look to take advantage of short-term price swings, or else invest in the long-term prospects of this technology.
How Can You Invest if You Predict AI ETFs Losing Value?
Investment vehicles like CFDs can be used if you want to trade on the basis that you believe the AI stocks included in an ETF will lose value.
Can Leverage Be Used with the Best AI ETFs?
Yes, leverage can be included if you use an investment vehicle like CFDs that allow this.
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