Many thematic exchange -related funds (ETFs) look exciting on paper, but fall short in practice. Common problems are narrow portfolios, concentrated bets on a handful of shares and high costs for what amounts to a niche index. If the theme is called, they rise. If it cools down, they can fall twice as quickly.
If you are looking for exposure to artificial intelligence (AI), the smarter route is sometimes to deal with a broad, well -constructed technology sector ETF that also includes companies in adjacent fields. One that I like in this regard is TD Global Technology Leaders Index ETF (TSX: TEC). This is what you need to know about this popular ETF.
What is TEC?
TEC follows the Solactive Global Technology Leaders Index, which is built from a portfolio of companies involved in traditional technology industries and those who work in disruptive areas. This includes cyber security, the internet of things, e-commerce, robotics and automation, artificial intelligence, autonomous vehicles and cloud computing/big data.
The management cost ratio is 0.39%, reasonable for a global, sector -specific ETF. In the past five years it has yielded an annual return of 18.04%. With $ 3.33 billion in assets, it is also one of the most popular technical ETFs in Canada.
Why I love Tec
The first reason is that it goes beyond just traditional technical names and plays AI pure. The portfolio also includes companies in Fintech and Medtech, which, despite their important technological applications, are often omitted outside of other AI and tech ETFs.
Secondly, it is diversified worldwide. While American tech giants are part of the companies, you will also find leading companies from Taiwan, the Netherlands and other markets. That adds geographical diversification and exposure to innovation hubs outside of North America.
Finally, it is supported by a reputable ETF provider. TD’s Asset Management Arm is a stable, established player in the Canadian ETF room. This is important, especially if you take into account the risks of smaller, less established issues.
For example, Emerge ETFs were confronted with a controversial controversy when it turned out that they had claims due to several funds, which led to their deletion. With a large bank behind it, TEC does not have the same operational risk.
The foolish collection meals
You do not have to buy a narrow thematic ETF to get AI exposure. A diversified Global Technology ETF such as TEC gives you that, plus exposure to other fast -growing technical themes and industries. It is a way to invest in the broader technological story without binding your fortunes to a single trend and for a lower fee to start up.
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