This ETF Lets AI Do the Stock Picking – Has it Done Better Than the S&P 500?

Picking stocks yourself can be challenging, especially given the volatility in the markets the past few years. If you don't want to stay on top of changing trends and political issues that may impact your investments, investing in an exchange-traded fund (ETF) can simplify your strategy.

One ETF that uses artificial intelligence (AI) to determine which stocks to buy is the AI Powered Equity ETF (NYSE Arca: AIEQ). The fund claims it is "the first actively managed ETF to fully utilize artificial intelligence as a method for stock selection." It claims to analyze "millions of data points" which factor into its decision-making process.

Year to date, its returns have been mediocre, with the fund rising 12% thus far. That trails the S&P 500, which is up around 16%. And when looking at the past 12 months, the delta is even greater, with the broad-based index up 6% while the AI fund has declined by 10%.

As of Aug. 11, the ETF's top three holdings included Roku (NASDAQ:ROKU), DoorDash (NYSE:DASH), and U.S. Bancorp (NYSE:USB), with each one of those stocks accounting for more than 4% of the ETF's total weight. In total, there are 113 holdings in the fund. It carries an expense ratio of 0.75%, which is a bit high but not excessive, particularly for an actively managed fund.

With an unproven stock-picking strategy, this can be a risky ETF to buy. It can be susceptible to social media and news, thus making it potentially volatile. It's an interesting fund to keep an eye on but there are better ones for investors to consider that have better, longer-term strategies which should make them more stable investments.