CEO Elon Musk is set to launch his highly anticipated Tesla robotaxis in Austin, Texas. Musk announced in a CNBC interview that self-driving cars will be on the road by the end of June.

 While the prospect of autonomous vehicles zipping around the streets may sound like the future arriving at lightning speed, experts are advising potential investors to take a closer look before jumping in.

“Look under the hood and see if what the fund holds is right for you,” said Roxanna Islam, head of sector and industry research at TMX VettaFi.

Tesla Robotaxis on the Way

Musk said the program will initially roll out with about 10 Tesla robotaxis and will scale up quickly to thousands of vehicles if the launch proves smooth and safe.

However, the vehicles will be geofenced to operate only in designated parts of Austin and will avoid intersections deemed unsafe — a precaution following concerns over recent software issues reported in Tesla’s Full Self-Driving (FSD) system.

“The vehicles will not enter areas that Tesla considers hazardous intersections,” Musk said, referencing a recent Business Insider report about a critical FSD error involving red-light recognition. Read more

Investment Temptation: Why Experts Say 'Slow Down'

The announcement has undoubtedly caught the attention of tech-savvy investors, many of whom are eager to get in early on what they believe could be the next transformative industry.

“Whether it’s self-driving vehicles or any future technology — AI being the largest of the categories here — you don’t treat it any differently than any other investment opportunity,” said Douglas Boneparth, president of Bone Fide Wealth and a member of CNBC’s Advisor Council.

Instead of blindly diving in, Boneparth recommends a methodical investment strategy that aligns with one’s risk tolerance and long-term financial goals. The excitement surrounding Tesla robotaxis should not overshadow fundamental investing principles.

Thematic ETFs 

For those wanting exposure to the autonomous vehicle sector, thematic ETFs (exchange-traded funds) offer a compelling entry point. These funds often contain a basket of stocks that stand to benefit from the rise of a specific industry, like self-driving technology.

“You’re investing in its early days, and you’re going to see it grow and play out in the future,” Islam said.

However, she warned that many ETFs may not be as focused as investors assume. Some funds include tech giants like Microsoft and Nvidia, which may already be present in a diversified portfolio. Investors seeking pure exposure to autonomous vehicle plays should investigate fund holdings carefully.

“Lots of autonomous vehicle ETFs include Tesla and industry enablers like Nvidia and Microsoft,” Islam noted.

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Play It Safe With an 'Opportunity Portfolio'

Even if investors are confident in Tesla’s vision, experts like Boneparth recommend placing riskier, high-reward investments in what’s often called an “opportunity portfolio.” This is a small slice of a broader financial plan that’s reserved for adventurous bets.

“5% to 10% of your overall investable net worth being put towards things that are more adventurous or opportunistic is usually where we start the conversation,” Boneparth advised.

Islam echoed this approach, suggesting no more than 5% allocation to thematic ETFs specifically.

Don’t Chase Headlines

While headlines about Tesla robotaxis and artificial intelligence breakthroughs may seem promising, experts caution that hype should never substitute for research.

“Just because it’s extremely popular and extremely exciting doesn’t mean you treat it any differently from the amount of due diligence and research you would do,” Boneparth said.

Related Links:

• Tesla Robotaxis to Hit Austin Streets
• FSD Safety Concerns and Intersection Geofencing