Quite a lot of thematic exchange-traded funds (ETFs) look thrilling on paper however fall brief in observe. Widespread issues embrace slender portfolios, concentrated bets on a handful of shares, and excessive charges for what quantities to a distinct segment index. When the theme is sizzling, they soar. When it cools, they will drop twice as quick.
For those who’re in search of synthetic intelligence (AI) publicity, typically the smarter route is to go together with a broad, well-constructed know-how sector ETF that additionally consists of firms in adjoining fields. One I like on this regard is TD World Know-how Leaders Index ETF (TSX:TEC). Right here’s what that you must learn about this widespread ETF.
What’s TEC?
TEC tracks the Solactive World Know-how Leaders Index, which is constructed from a portfolio of firms concerned in conventional know-how industries and people working in disruptive fields. This consists of cybersecurity, the Web of Issues, e-commerce, robotics and automation, synthetic intelligence, autonomous autos, and cloud computing/huge information.
Its administration expense ratio is 0.39%, affordable for a world, sector-specific ETF. Over the previous 5 years, it’s delivered an annualized return of 18.04%. With $3.33 billion in property below administration, it’s additionally some of the widespread tech ETFs in Canada.
Why I like TEC
The primary motive is that it goes past simply conventional tech names and AI pure performs. The portfolio additionally consists of firms in fintech and medtech, which regularly get unnoticed of different AI and tech ETFs regardless of their important technological functions.
Second, it’s globally diversified. Whereas U.S. tech giants make up a portion of the holdings, you’ll additionally discover main firms from Taiwan, the Netherlands, and different markets. That provides geographic diversification and publicity to innovation hubs exterior North America.
Lastly, it’s backed by a good ETF supplier. TD’s asset administration arm is a secure, established participant within the Canadian ETF area. That’s vital, particularly when you think about the dangers of smaller, much less established issuers.
For instance, Emerge ETFs confronted a high-profile controversy when it was discovered to have receivables owing for a number of funds, resulting in their delisting. With a serious financial institution behind it, TEC doesn’t carry that very same operational danger.
The Silly takeaway
You don’t have to purchase a slender thematic ETF to get AI publicity. A diversified international know-how ETF like TEC offers you that, plus publicity to different high-growth tech themes and industries. It’s a approach to spend money on the broader know-how story with out tying your fortunes to a single pattern, and at a decrease payment in addition.
