The robot ETF return gap: Why it's 20 percentage points wide

we've analyzed why returns can vary by up to 20 percentage points when investing in robotics ETFs. Find the ETF that's right for you by comparing the holdings and investment strategies of the leading robotics ETFs, including ARKQ, ROBO, BOTZ, and more.

why the same robotics theme yields different returns

if you're interested in robotics stocks, robotics ETFs are a smart way to start if you're overwhelmed by the volatility of individual stocks. But over the past three months, I've noticed an interesting phenomenon.

i noticed that two ETFs covering the same robotics theme returned 31%, while one returned just 11%. That's a difference of 20 percentage points. Why such a difference when investing in the same industry?

the answer is surprisingly simple: the robotics industry is a much broader and more diverse category than you might think. Industrial robotics alone is divided into factory automation, logistics automation, collaborative robotics, and more, and includes autonomous driving, drones, and robotic components.

as a result, different ETFs will have very different returns depending on which companies they include.

31% vs. 11%, what's the difference?

ARKQ was heavily invested in Tesla

with a 31% return over the past three months, ARKQ is strong in the autonomous driving and aerospace sectors. It has an 11.5% weighting in Tesla, which has been a big driver of the ETF's overall return as Tesla stock has surged.

Another unique feature of ARKQ is that its top five holdings account for 40% of the total. it's a strategy that focuses on high-conviction stocks rather than diversification, and the inclusion of unmanned aerial vehicles and drones makes it feel like a bet on the future of the robotics industry.

ROBO is well diversified among component companies

rOBO, which returned 11%, has a completely different approach, focusing on companies that make the precision parts and materials needed to power robots rather than finished robots.

it's well diversified, with no particular favorites, and it includes a large number of Japanese robotics companies, so it's stable but not likely to explode.

to summarize the difference between the two ETFs. ARKQ is aggressive, ROBO is conservative.

a complete comparison of the six leading robotics ETFs

aRKQ and ROBO aren't the only robotics ETFs out there. There are several others, each with different colors. Let's take a look at them one by one.

BOTZ Goes Nvidia

BOTZ focuses on industrial robotics and factory automation companies. it has a high weighting in Nvidia (11.1%), which it believes will benefit from the growing demand for AI chips needed for robots.

if you want to invest in companies that make robots that are actually used on the factory floor, BOTZ is a good place to start.

HUMN invests in the future of humanoid robots

this sector is dominated by finished robotics companies, such as humanoid robots and collaborative robots. tesla is 9.7%, Nvidia is 6.3%, and there are also companies from South Korea, China, and Japan.

this ETF will benefit from the commercialization of robots that walk and work like humans. it's still in the early stages, but it's an area with a lot of long-term growth potential.

ROBT is Diversified

this ETF invests across the robotics industry, including robotics software, drones, and logistics automation. with over 120 constituent stocks, it's a diverse pick.

whether you want to avoid the risks of a specific sector or want to follow the growth of the robotics industry as a whole, ROBT is a good choice.

KOID, which includes Asian robotics companies

along with finished robotics companies, KOID also includes companies that make components such as rare earths, precision gearboxes, and sensors. It's not just U.S. companies, but also Korean, Chinese, and Japanese companies.

the composition recognizes that Asia is a manufacturing powerhouse and plays an important role in the production of robot parts.

how to pick the right robotics ETF for you

if you've made it this far, you're probably wondering which ETF to buy, so let me break it down for you based on your investment style.

if you believe in the growth of big tech companies like Tesla or Nvidia, ARKQ or BOTZ are good choices. they're heavily weighted toward the top holdings, so if those companies do well, the ETF's returns will go up significantly.

conversely, if you want to minimize risk, go for a well-diversified ETF like ROBO or ROBT. They're less likely to go up, but they're also less likely to go down.

if you're curious about the future of humanoid robots, HUMN might be interesting. It's still a nascent market and can be volatile, but it's worth considering for a long-term investment.

kOID is also a good choice if you want to invest globally, including Asian companies.

one more tip is to buy multiple ETFs in small increments. give it three months to get a feel for the behavior of each ETF, and you'll see which ones are a good fit for your investment style.

frequently asked questions

Q. are robotics ETFs suitable for long-term investing?

A. Yes, the robotics industry is poised for long-term growth. however, each ETF has a different composition, so there may be some short-term volatility. If you plan to hold them for at least a year, they're a good fit.

Q. if I invest in a robotics ETF, am I duplicating my investment in Tesla and Nvidia?

A. Yes, you are. most robotics ETFs include Tesla or Nvidia, and if you already own those stocks, you may want to rebalance to account for the overlap.

Q. are there any robot ETFs that can be traded domestically?

A. There are some robotics-themed ETFs listed on domestic exchanges. however, there are fewer options than international ETFs, and they may have different holdings. If you have an international stock account, you can buy U.S.-listed ETFs directly.

Q. why do robotics ETFs have lower returns than stocks?

A. Because ETFs are diversified, they don't have the explosive returns of individual stocks. it's a tradeoff between return and stability, with less risk and more stability.

Q. if the robotics industry takes a downturn, will ETFs lose money?

A. Absolutely. if the robotics industry as a whole suffers, ETF returns will suffer, but because they're diversified across many companies, the impact of a single company failing is less severe.

bottom line

even within the same theme, robotics ETFs vary widely in performance depending on their composition. if you want to be aggressive, choose an ETF with a high weighting in a specific stock, or if you want to be safe, choose a well-diversified ETF.

what are your thoughts on robotic investing? let us know in the comments, and if you'd like to stay up to date with great investing tips, please subscribe. we'll see you in the next installment.