🌟 Investing in AI Made Simple: Diversify with AI ETFs

Explore how AI ETFs can help you invest in the future without the single-stock risk.

Hey there,

Whether you agree with the ethics or not, AI is big and will be around for quite some time. With its breakthrough comes a lot of opportunities, one of which is the chance to make it financially by investing in the promise. We’ve all heard the buzz around AI, especially with companies like Nvidia making headlines (and folks who cashed in on investing in the company’s stocks). 

But here’s the thing—AI is bigger than any one company. And guess what? You can still get in on the action without putting all your eggs in one basket.

In this edition of the SimplVest Newsletter, we’re diving into how you can invest in AI through ETFs (Exchange-Traded Funds). Whether you’re a seasoned investor or just starting out, this is your guide to understanding the why, what, and how of AI ETFs.

Let’s break it down.

🌐 Why AI ETFs?

So, Nvidia just posted some jaw-dropping financials—122% sales growth in a single quarter! But here’s the kicker: their stock price still dipped. Wild, right? That’s because even with all the hype, people are starting to wonder if the future growth of Nvidia is already baked into the price.

This is where AI ETFs come into play. Instead of betting it all on one high-flying stock, ETFs let you spread your investment across a bunch of AI-driven companies. It’s like buying a basket of fruits instead of just one apple—you get a taste of everything, and if one fruit doesn’t ripen, you’ve still got plenty of others.

🧠 How an AI ETF Fits into Your Portfolio: Which One’s for You?

As is the case with fingers, not all AI ETFs are the same. Here’s a breakdown of the main types so you can find one that aligns with your investment goals:

1. AI Stock Pickers
These ETFs use AI algorithms to choose stocks, but they don’t necessarily invest in AI companies. It’s like having a robot manage your portfolio, picking stocks based on data and trends.

Example: These funds aim to drive your returns by making smart stock picks, even if those stocks aren’t directly tied to AI technology.

2. AI and Robotics Funds
These focus on companies involved in both AI and robotics. Think of it as investing in the brains and brawn of the tech world.

Example: Imagine investing in a company that creates robots for warehouses. While the focus might be on robotics, the AI that powers these machines is just as crucial, giving you exposure to both cutting-edge industries.

3. Generative AI Funds
These funds invest in companies leading the charge in generative AI—think of tools like ChatGPT or Google’s Gemini. They often include tech giants like Nvidia, Microsoft, and Alphabet.

Example: If you’ve ever been amazed by how ChatGPT can generate a coherent essay or answer complex questions, you’ve witnessed generative AI in action. These funds focus on the companies pushing the boundaries of this technology.

4. AI Beneficiary Funds
These ETFs are all about the companies that stand to benefit from AI, even if they aren’t directly developing the technology. They offer a more diversified portfolio, spreading your risk across a wider range of industries.

Example: Think of businesses that use AI to improve their operations—like a retailer optimizing inventory with AI algorithms. These funds include companies that are adopting AI to enhance their efficiency and profitability

🎯 How to Choose the Right AI ETF

Choosing an ETF isn’t just about the name. You’ve got to dig a bit deeper—look at what’s inside the portfolio. Most ETFs are super transparent about what they hold, so take advantage of that. If you already own a bunch of tech stocks, you might want to look for an AI ETF that gives you a different flavor. Or, if your portfolio is a mixed bag, adding a more targeted AI fund can give it that extra boost.

📈 Top AI ETFs to Watch

Here are some AI ETFs you might want to check out:

1. Global X Robotics & AI ETF (BOTZ): Focuses on robotics and AI, with big names like Nvidia and ABB. It’s been around since 2016 and is a bit more growth-oriented.
2. ROBO Global Robotics & Automation Index ETF (ROBO): This one’s all about companies driving innovation in robotics and automation. It’s a well-diversified fund with a mix of tech and industrial stocks.
3. iShares Robotics and AI ETF (IRBO): Tracks companies in both developed and emerging markets, offering exposure to small-cap companies poised for growth.
4. First Trust Nasdaq AI & Robotics ETF (ROBT): A bit more niche, focusing on AI and robotics within the Nasdaq.

Each of these ETFs offers something a little different, so take a look at what aligns best with your investment goals.

🚀How to Start Investing in AI ETFs

If you’re convinced that AI is more than just a trend, but the future, then it might be time to consider adding an AI ETF to your portfolio. Here’s how to get started:

1. Research and Compare: Before you jump in, you’d do well to compare different AI ETFs based on their holdings, expense ratios, and historical performance. Tools like ETF.com and Morningstar are excellent resources for detailed comparisons.
2. Choose a Brokerage: To buy AI ETFs, you’ll need a brokerage account. Some popular options include Robinhood, Fidelity, and Vanguard. These platforms offer user-friendly interfaces and helpful tools for both beginners and experienced investors. However, if you’re in Nigeria, you may face some restrictions, but platforms like Risevest, Bamboo and Chaka that allow you to invest in global stocks from here will do the trick.
3. Invest and Monitor: Start by investing a small amount to get a feel for the market. Keep an eye on your investments by regularly monitoring market trends and developments in the AI industry. This will help you make informed decisions and adjust your strategy as needed.

Risks to Consider

While AI ETFs offer exciting growth potential, they are not without risks:

• Market Volatility: As with any stock, AI-related stocks can be volatile, particularly in emerging industries where growth is rapid but unpredictable.
• Technological Risks: AI is still evolving, and not all companies will succeed in effectively implementing AI technologies. This could impact the performance of AI ETFs, especially those heavily invested in specific companies or sectors.

Final Thoughts:

Investing in AI doesn’t have to be complicated or risky. With the right ETF, you can gain broad exposure to the companies driving the AI revolution—without putting all your money on one bet. Keep exploring, keep learning, and most importantly, keep growing your portfolio!

Until next time, keep investing smartly and simply.

Best, The SimplVest Team

This newsletter is for informational purposes only and should not be considered financial advice. Always do your research or consult with a financial advisor before making investment decisions.