In segment from Motley Fool Answers, Alison Southwick and Robert Brokamp are joined by senior Motley Fool analyst Simon Erickson to talk about the disruptive trends of artificial intelligence, robotics, and automation. They start by helping a listener hunt for a high-quality fund that will let investors take a diversified position in this space. Erickson's pick is ROBO Global.
A full transcript follows the video.
This video was recorded on June 13, 2017.
Alison Southwick: It's time for "Answers Answers," and today's question comes from John. John writes, "I've been looking at artificial-intelligence ETFs and/or mutual funds. I see this is an industry that is only beginning to show its potential and will carry into the future with high rewards. Are there any recommendations on such funds that I should look into, and what should I look at when comparing funds? Thank you. A big fan of your podcast. John."
And joining us to help answer that question is Simon Erickson.
Robert Brokamp: Hi, Simon!
Simon Erickson: Hello, Alison. Hey, Bro. Glad to be here. I feel like I'm in a roomful of celebrities. Thanks for having me on the program.
Southwick: It's great to have you.
Brokamp: Oh, stop, you.
Southwick: Simon, you work on Motley Fool Explorer for Supernova and you are a big, I don't know, techie, nerdy, AI, robotics-following kind of guy.
Brokamp: Are you human?
Erickson: I like the techie part of that the most.
Brokamp: Are you human? That's what I want to know.
Erickson: Yeah, we're looking for the biggest trends that the market's going after for the future.
Southwick: So we brought you in not only to answer this question, but also for our main segment here. But for now let's stick to the question. John wants to find an AI ETF or mutual fund. Where should he look?
Erickson: One that we would recommend is Robo Global. The ticker for that is ROBO, John. It's an ETF that actually does exactly what you're describing. It's tracking a variety of robotics and automation-equipment companies, which we think is a pretty interesting class right now. There's a lot of stuff going on with robotics, and there's a lot of companies making a lot of money off that. That would be one opportunity, I think.
Southwick: This is a pretty nascent sort of industry. Is this the only game in town, or are there other ones to look at?
Erickson: There's a lot of individual stocks, too. When we're talking about ETFs, that's one idea. Of course, we've got a lot of companies we can discuss. Individual equities that are really more focused on robotics and stuff like that.
Brokamp: I'll just throw in a few basic principles about picking funds in general. Cost always matters, and whenever you have a specialized fund or ETF, it's always going to be a higher-cost type of thing, so be prepared for that.
Also, a lot of these things -- depending on the sector that you're looking at -- I would look at the concentration, meaning how many companies does it own and how much of the fund is invested in the top 10 holdings? Some of these are going to be more diversified than others. Especially when you have an emerging industry like this, it could be really riding on the fates of like three to five companies, and that I would say is probably less ideal than something that's a little more diversified.
Erickson: Good point. Eighty-five holdings in this one. Management fee of 0.95%. Bro, you're the expert on analyzing the funds, but at an overview it looks like it's in the right sector for sure.
Brokamp: And it's certainly higher than if you were looking at a regular old index fund. You just have to be prepared for that when you look at a fund like this.