Investing in Robotics and Automation, the Trend that will Wipe Out 47% of Jobs

Will you and I still have a job 10-20 years down the line? Artificial intelligence, robots, big data and automation have at times been predicted to take as much as 47% of existing jobs out of the equation in just a decade or two. Presumably upcoming technologies like these will fundamentally change the remaining 53% of jobs. Slow and expensive processes (and people) will be replaced by computers, surgeons and security guards replaced by robots, computers will know what we need before we think of it ourselves, and so on. This is like an industrial revolution all over again.

The trends here are broad and unpredictable, affecting every part of our daily lives. From driverless cars, chatbots as help desk, to the internet of things or digital warfare. While this trend will affect practically any company you invest in (many will keep up while others won’t), there are some companies actually driving the change that you may want to allocate a bit extra to in order to stay ahead of the curve. Simply put, some companies are applying the trends, while others are developing them.

Below I suggest a simple portfolio consisting of 4 ETFs that should help you future-proof your portfolio and benefit from the trend of automation.

Firms that don’t innovate will miss out

As competitors improve technology and find new ways to make use of data and computers, firms that stubbornly refuse to go along in that trend will miss out. However, identifying the actual companies that will fall victim or will survive this trend is hard. Therefore I suggest to focus on technology companies and companies specifically searching for innovations in the robotics and automation space, diversifying your portfolio across US, Europe and China. So what types of companies and products might you want to gain exposure to? For instance the below:

  1. Driverless cars
  2. 3D printing
  3. Virtual/mixed reality
  4. Healthcare innovation
  5. Security and surveillance
  6. Actuation and sensors
  7. Artificial intelligence and deep learning
  8. Internet of things

Portfolio construction: robotics and automation, US/Europe/China technology

CategoryNameIDTERAlloc %
Robotics ETFROBO Global | Robotics & Automation Index ETFROBO0.95%60.0%
China techGuggenheim China TechnologyCQQQ0.71%10.0%
US techVanguard Info Tech ETFVGT0.10%20.0%
Europe techSPDR MSCI Europe Tech ETFITEC LN0.30%10.0%

Risk, diversification and allocation

  • Risk level: high
  • Diversification: low
  • For risk and total return since initiation see Portfolios
  • Probability of this theme playing out in the next 3-10 years: 25%-75%

Portfolio characteristics (full look-through, from USD perspective)

  • Dividend yield: 0.1%
  • Ex-ante predicted volatility: 11.6%
  • 1 year 95% Value-at-Risk: –16.9%
  • Scenario 2008 Lehman Brothers default period: -21.3%
  • Scenario Interest rates +100bps: +5.8%
  • Scenario 2008-2009: -25.9%
  • Scenario 2010 onwards: +167%
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Categories: Micro, Technology, Themes

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