Published on November 8, 2023, 3:31 pm

The Cost-Effective Way To Invest In Artificial Intelligence: Vanguard Information Technology Index Fund

Artificial intelligence (AI) is a rapidly growing industry that has the potential to transform various sectors, including agriculture, healthcare, information technology, education, gaming, and urban development. According to a report by Grand View Research, the AI market is expected to reach a staggering $2.7 trillion by 2032, with a compound annual growth rate of 36.8%.

Investors have taken note of this trend and many tech giants in the AI space have seen their share prices soar in recent years. However, investing in AI doesn’t have to be complicated. There are several exchange-traded funds (ETFs) available that offer a cost-efficient way to gain exposure to this exciting growth opportunity.

Interestingly, there are approximately 41 ETFs that specifically mention AI in their title or marketing materials. While these funds provide access to the AI sector, their average expense ratio is relatively high at 0.98%. This means investors would pay $98 in fees for every $10,000 invested.

Fortunately, there is a low-cost alternative that shouldn’t be overlooked – the Vanguard Information Technology Index Fund (VGT). Despite not explicitly mentioning artificial intelligence in its prospectus, VGT holds significant positions in leading companies within the AI field such as Apple, Microsoft, Nvidia, Adobe, Arista Networks, Marvell Technology, and Palantir Technologies.

What sets VGT apart is its rock-bottom expense ratio of just 0.10%, significantly lower than the average for AI-oriented ETFs. Additionally, VGT has delivered impressive returns over its operating history compared to other well-known AI ETFs.

For instance, the Global X Artificial Intelligence & Technology ETF (AIQ) has an expense ratio of 0.68% but has produced total returns of 101% since 2018. On the other hand, VGT has generated substantial returns of 143.5% during the same period.

Notably, VGT has also outperformed the broader Nasdaq Composite Index over the past decade. This shows that low-cost ETFs like VGT can offer investors an efficient and cost-effective way to benefit from the emerging AI landscape.

If you are considering investing in AI for the long term, adding VGT to your investment portfolio could be a wise decision. It not only provides exposure to major players in this rapidly growing sector but also offers low costs and strong historical performance.

Ultimately, as AI continues to revolutionize industries worldwide, investing in the right opportunities can potentially lead to significant financial gains. With its focus on low expenses and strong returns, the Vanguard Information Technology Index Fund is certainly a compelling choice for investors looking to ride the wave of the AI revolution.


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