Should Investors Buy AI & Technology ETFs Instead of Individual AI Stocks?

The demand for artificial intelligence (AI) stocks may have investors thinking about how to invest in the sector with minimal risk. This is a critical issue, as stocks likeNvidia(math.) andTesla AI stocks like this one have suffered big sell-offs when they've fallen out of favor.

In addition, the AI industry consists ofDigitalOceanrespond in singingC3.ai It is made up of smaller stocks. While investors may see great potential for earnings, unexpected events can often derail this growth story.

Fortunately for investors, exchange-traded funds (ETFs) have been quick to capitalize on AI, with one of the better performers beingGlobal X Artificial Intelligence & Technology ETF (NASDAQ Resonance Symbol: AIQ)The question for investors is whether this technology ETF can generate enough returns while minimizing risk. The question for investors is whether this technology ETF can generate enough returns while minimizing risk.

Global X Artificial Intelligence & Technology ETF Profile

The Global X Artificial Intelligence & Technology ETF has existed since May 2018 . It owns more than 80 stocks related to artificial intelligence. Not surprisingly, its top holding is Nvidia.

As much as possible, it still invested in all the so-called "Fab Four" stocks and Nvidia's server name partnersSuper Micro ComputerThe latter has made impressive returns in recent months.

It also owns stocks that have little to do with artificial intelligence, such as streaming giantNetflixKomnotherapy Healthcare Technology Co.GE Healthcare Technologies and Brazilian fintech companiesStoneCoIt's not limited to stocks on U.S. exchanges. It's not limited to stocks on U.S. exchanges, either, but is looking overseas at stocks such as Samsung orSiemensThe

In addition, its 0.68% fee rate is significantly higher than the average rate, which according to Morningstar is 0.37% in 2022.For every $10,000 invested, the investor is expected to pay $68 per year in fees.

Performance

However, some investors may find its fees worthwhile. At the time of writing, the ETF's return since inception is over 130%, which is slightly higher than the return of 130%.Standard & Poor's 500 The Arithmetic Return Rate of an Index.

Moreover, its diversification makes it a safe investment. Its largest holding, Nvidia, accounts for just over 4% of its portfolio.

In fact, it holds far fewer companies than the 500 companies in the S&P 500. The S&P 500 also includes all major industries.

Despite this, the safety of the Global X Fund is outstanding due to the relatively small size of the position. For exampleSPDR S&P 500 ETF TrustThe Fund's largest holdings areApple Inc. In comparison, Apple accounts for about 2.41 TP3T of the Global X ETF, and in such an allocation, the higher return rate is likely a testament to the Global X team.

Should investors buy Global X funds?

The suitability of the Global X Fund for investors ultimately depends on the individual investor. However, the fund appears to be an excellent choice for investors who wish to gain exposure to AI without having to worry about risk.

While Koon's fees are relatively expensive, the fund has outperformed the S&P 500 over the long term. In addition, it avoids the daunting task of finding the next Nvidia or Supermicro before their unprecedented growth, a task most individual investors can't accomplish.

Admittedly, such funds are unlikely to produce record returns. But for those who want to be rewarded for their AI advances without worrying about the consequences, the Global X Fund will serve them well.

Should you invest $1,000 in Global X Funds - Global X Artificial Intelligence & Technology ETF now?

Before buying shares of Global X Funds - Global X Artificial Intelligence & Technology ETF, consider the following:

Motley Fool Stock AdvisorThe analyst team has just named what they believe to be the best value for investors.10 Gift Certificates...... The Global X Funds - Global X Artificial Intelligence and Technology ETF is not one of them. The 10 stocks that made the cut are likely to generate huge returns over the next few years.

Consider this April 15, 2005Nvidia) at the time of listing ...... If you invested $1,000 at the time of our recommendation, theYou will have $533,293.! *Stock Advisor provides easy-to-use stock investment tools for investors.

Stock AdvisorIt provides investors with an easy-to-learn blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. Stock Advisor The service has contributed to the S&P 500 Index's return since 2002.translate twiceMuch*.

View 10 Gift Certificates

*Stock Advisory Rates as of April 8, 2024

Will Healy owns shares of DigitalOcean.The Motley Fool recommends Apple, DigitalOcean, Netflix, Nvidia, StoneCo and Tesla.The Motley Fool recommends C3.ai.The Motley Fool has a disclosure policy.

Should Investors Buy Artificial Intelligence and Technology ETFs Instead of AI Individual Stocks? This article was originally published in The Motley Fool.