President Joe Biden recently unveiled his massive $2 trillion American Jobs Plan. Investors are still buzzing from the announcement. One of the sectors going to benefit from the infrastructure bill is the 5G industry. This makes 5G exchange-traded funds (ETFs) an attractive investment for investors looking for a safe way to gain exposure to this high-growth area.
Data consumption is skyrocketing. And the trend will continue way past the novel coronavirus pandemic. But the existing telecommunications infrastructure has left a lot to be desired. Plus, the strength of the connection is not universal across America. The switch to 5G for added digital functionality and speed is a must for all these reasons.
You might wonder why it isn’t better to go ahead and invest in semiconductor, hardware and telecom services stocks directly. There are several advantages to investing in 5G ETFs versus 5G stocks. They offer flexibility, tax benefits, and risk management, among other things. Besides, with the rollout of 5G wireless networks and 5G-capable devices increasing at a rapid clip, 5G ETFs become a no-brainer.
Here are five 5G ETFs that you should keep in your portfolio:
- Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSE:SRVR)
- Vanguard Communication Services ETF (NYSE:VOX)
- Global X Internet of Things Thematic ETF (NASDAQ:SNSR)
- Defiance Next Gen Connectivity ETF (NYSEARCA:FIVG)
- Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ)
5G ETFs: Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR)
Expense Ratio: 0.6%
We start this list of 5G ETFs with a rather unconventional way of investing in the space. When you think about 5G, your mind doesn’t automatically wander to real estate. Nonetheless, it should.
In the world we live in now, data is everything. We have more of it now than ever before. All of that data needs to be collected somewhere. That’s where data centers come into play, massive server farms where cloud-based data is stored.
SRVR is invested in stocks like Crown Castle (NYSE:CCI), American Tower (NYSE:AMT), and Digital Realty (NYSE:DLR). These are all data center real estate investment trusts (REITs), where all or the bulk of the trust’s revenues come from leasing data centers.
Due to the companies being REITs, they have to abide by the 90% rule for REITs set out by the Securities and Exchange Commission (SEC). To qualify for REIT status, these companies will have to distribute at least 90% of their taxable income each year to their shareholders, making them very safe investments.
If you are interested in a curveball way to invest in 5G, you should look no further than this.
Vanguard Communication Services ETF (VOX)
Expense Ratio: 0.1%
If you are interested in 5G investing, you’ve probably heard of VOX. It has more than $3 billion of assets under management or AUM, making it one of the biggest telecom ETFs.
Holdings are spread out across several heavy hitters like Verizon Communications (NYSE:VZ), Comcast Corp. (NASDAQ:CMCSA), Google parent Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL), Facebook (NASDAQ:FB), and AT&T (NYSE:T).
Through investing in the largest tech companies in the U.S., VOX has diversified its portfolio immensely. Hence, it becomes a relatively conservative way to invest in 5G ETFs.
Global X Internet of Things Thematic ETF (SNSR)
Expense Ratio: 0.68%
The Internet of Things, or IoT, defines the network of physical objects – “things” or objects – installed with sensors, software, and other technologies to connect and transfer data with other devices and systems over the internet. In a nutshell, IoT means the connection of billions of physical devices around the world to the Internet.
If this concept piques your interest, SNSR is right up your alley. It counts ADT (NYSE:ADT), Skyworks Solutions (NASDAQ:SWKS), NXP Semiconductors (NASDAQ:NXPI) as some of its biggest holdings.
From GPS systems to wireless communications, you have several sectors covered with SNSR. If you are more interested in connecting with 5G through their devices, this ETF is exactly what you are looking for.
5G ETFs: Defiance Next Gen Connectivity ETF (FIVG)
Expense Ratio: 0.3%
Defiance Next Gen Connectivity ETF focuses on the hardware side of 5G. Among its holdings, you will find semiconductor company Qualcomm (NASDAQ:QCOM), Swedish multinational networking and telecommunications company Ericsson (NASDAQ:ERIC), and the second-largest U.S. wireless carrier Verizon.
Overall, hardware companies constitute approximately 75% of the ETF’s AUM, making it very different from the software-focused ones.
Investing in FIVG means you are invested in several growth-oriented suppliers of 5G technology, ones that will form the backbone of our future.
Global X Artificial Intelligence & Technology ETF (AIQ)
Expense Ratio: 0.68%
Our final pick also has a very diversified portfolio. Some of the biggest holdings include Oracle (NYSE:ORCL), Cisco Systems (NASDAQ:CSCO), Nvidia (NASDAQ:NVDA), and Netflix (NASDAQ:NFLX). Hence, you get the idea that this is pretty well spread in terms of its portfolio. But each of the companies involved is invested in 5G growth in one way or another.
For example, you might not think 5G immediately when you think about Netflix. However, the streaming giant has spent a lot of time and effort to improve how they compress data for streaming and then decompress it for any viewing device.
It has also developed a global content delivery network to ensure the viewer’s content choice gets to them through the most effective and efficient data stream. All that will become quicker since 5G is 20 times faster than 4G.
Hence, every company has something to gain from the growth of 5G technology. In the meantime, we have Nvidia and Qualcomm, companies producing the tech that will form the bedrock of 5G moving forward.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.