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Is it a correction? Is it a bear? Robotics, automation & AI investors couldn’t ask for better news

Something funny happened on Wall Street this week, but almost no one is laughing. After seeming to prove that it was nearly impervious to any threat, the market suddenly—and dramatically—moved south. We won’t include the numbers here; every investor knows not just the impact on the major indices, but how that shift has impacted your personal holdings. And yet, for any investor who is in this game for the long haul, lower prices are nothing but a pleasant surprise. That’s especially true for investors focused on robotics, automation, and AI (RAAI).

We all know the investing rules of thumb. Buy high-quality companies. Diversify your holdings across industries, geographies, and asset types. Then buckle up, hold on and, above all, stick to your strategy. Easier said than done. But at ROBO Global, those are the exact rules we follow to maintain the ROBO Global Robotics & Automation Index, which is celebrating its 5-year anniversary next week. By giving every investor access to the very companies that are fueling tomorrow’s global productivity and growth, the ROBO Index can help turn even a full-fledged bear market into the greatest potential for growth. Here’s our strategy and how it works—in any market environment:

High-Quality Companies

To choose high-quality companies, we begin by looking at core factors like market share, revenue, and technological leadership. Then we dive into a deeper level of research to target tomorrow’s winners—not just today’s leaders. The members of our Strategic Advisory Board are bona fide experts in robotics, automation, AI, or all three. In contrast to stock pickers who look only at a company’s financial fundamentals, these professors, researchers, and technologists help us select from our database of more than 1,000 companies around the world who are actively developing the applications and technologies that are driving the robotics revolution. Their research into what each company is developing, who is behind their innovative work, and how emerging technologies can be applied in the real world is key to identifying the most suitable members for the index.

Diversified Holdings

Rather than focusing only on the largest companies in RAAI, our methodology is built to define a diverse and unique mix of technology companies (meaning companies that deliver the products and services that enable robots to “think, sense, and act”) and applications companies (meaning companies that deliver the underlying components that enable robotics and automation technologies to fuel products, services, or manufacturing processes). Each company must fit into one of our 12 defined subsectors, be positioned as a market and technology leader, and adhere to the ROBO Global ESG Policy. As a result, the ROBO Index spans the entire value chain of RAAI, including more than 80 stocks in 14 countries. Plus, the market-cap exposure of the index is highly diversified compared to other portfolios, including 28% large-cap, 49% mid-cap, and 23% small-cap.

Consistent Strategy

To support a consistent, long-term strategy and maintain that critical diversification, we rebalance the index quarterly and use a 2-tier equal weighting scheme that is designed to respond to and capture changes in the technological and competitive landscapes as they happen. It’s the best way we know of to seize the true value of the latest innovations in RAAI. Invest in the long term and don’t stray, or in the words of Warren Buffet (from his 1996 letter to shareholders):

“Your goal as an investor should simply be to purchase, at a rational price,
a part interest in an easily-understandable business whose earnings are
virtually certain to be materially higher five, ten and twenty years from now.
Over time, you will find only a few companies that meet these standards –
so when you see one that qualifies, you should buy a meaningful amount
of stock.  You must also resist the temptation to stray from your guidelines:
If you aren’t willing to own a stock for ten years, don’t even think about
owning it for ten minutes.”

The Pain of a Downturn, the Joy of the Long Term

There’s no doubt about it: market downturns hurt. No investor enjoys watching those numbers fall. And yet as long as you continue to invest in a diverse mix of high quality companies and, yes, stick to your strategy, the pain is short lived and the gains are very likely long lasting.

That’s especially true for the companies in the ROBO Global Robotics & Automation Index. These innovators are not flashes in the pan. They’re not fueling a consumer trend. They’re not based on a whim or some stock picker’s gut feel. Instead, the ROBO Index is a diversified collection of 87 companies which comprise the entire value chain of RAAI. Whether we’re entering a minor correction or a roaring bear, trust in your strategy, take advantage of lower market prices, and invest in your future. And then sit tight. If you’re investing wisely in robotics, automation, and AI, we expect the joy of the long term is just around the corner.

By Bill Studebaker, President & CIO, ROBO Global, and Chris Buck, Head of Capital Markets, ROBO Global

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