Move over Dow Jones, Drone Index May be the Future of Investing

With the drone industry soaring higher as an emerging force in the job market, it’s really no surprise that investors are taking notice of this potential technological boom. Nowhere is this trend more noticeable than in Switzerland, where UBS Bank recently announced the launch of the Robotics and Drone Index. The benchmark index, compiled for UBS by Solactive AG, will track companies that develop automated robotics as well as the UAV solutions.

In a recent Irish Times report, Solactive CEO Steffen Scheuble stated:

“Machines and automation will play an increasingly important role in the future. Drones are at the forefront of this second phase of the industrial revolution.”

Currently, the index includes robotics companies Kuka, Fanuc Corp. and U.S. drone manufacturer Aerovironment. According to Bloomberg, “[The] companies listed on the Robotics & Drones Index saw the value of their businesses grow by at least 50 percent in the past year, bringing their total market capitalization to $64 billion.”

The index could ride a growing wave of investment growth in drones as more and more A-list companies like Amazon, Google and Facebook explore UAV and other automated technologies, including driverless vehicles. The index is similar to the ROBO-STOX Global Robotics and Automation Index ETF — described by financial blogger Eric Dutram as a benchmark index that “looks to invest in companies that have some aspect of their business that is derived from robotics-related and/or automation-related products or services.”

While the growth of emerging tech index funds shows promise, the new game in town is not without risks. For example, the First Trust ISE Cloud Computing Index Fund (SKYY) recently took a beating despite sunny forecasts for the cloud industry. According to ETF Trends: “Several of SKYY’s top-10 holdings have posted double-digit losses over the past three months.” Similarly, the Global X Social Media Index ETF is “down about 15% on the year,” according to Barron’s. Despite the gains in the UAV industry, there is no guarantee that rising profits will equal success given the dozens of mitigating market forces at work in the economy.

For the complete Robotics and Drone Index report by Solactive, click here (PDF).

For a list of niche-technology index funds, click here.