As we enter the last stretch of the year, investors are looking for the best ways to invest in the 5G revolution. 5G wireless service is being rolled out as I write, across the U.S. as well as in many countries. Today we will discuss three low-risk strategies to begin investing in 5G.
This new generation wireless network technology will help connect societies when it comes to anything online. 5G will mean greater transmission speeds, and lower rates of delay in connectivity. More bandwidth will also support a greater number of connected devices.
Communication with cloud platforms, such as Amazon’s (NASDAQ:AMZN) Web Services and Microsoft’s (NASDAQ:MSFT) Azure will become faster and easier. The benefits will thus extend to not just individuals but also to businesses and even, the country’s infrastructure.
Recent research by Rupendra Nath Mitra and Dharma P.Agrawal at the University of Cincinnati says:
“In a true “networked society” remote controlled operation of appliances and critical commercial machines over a reliable 5G network will be possible with zero delay. Real-time control of machines by using mobile devices will be possible, making the Internet of things (IoT) more available to all.”
With that back ground here are three low-risk investing strategies in 5G stocks:
- Pay attention to streaming and internet firms;
- Consider ETFs;
- Diversify your portfolio.
Developments around this new technology means long-term investment opportunities for retail investors. However, every investment comes with both return and risk potential. Therefore, proper due diligence both on the sector and businesses in the field is crucial.
Low-Risk 5G Investing Strategies: Pay Attention To Streaming And Internet Firms
When 5G wireless connectivity comes up, consumers understandably think of mobile phones, and the cellular carriers rolling out the technology.
However, it’s equally important to remember other businesses and sectors have a significant role to play in various aspects of 5G deployment and use. For instance, increased download speeds and cloud steaming benefit gaming companies like Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA) and Nintendo (OTCMKTS:NTDOY).
Social media giants like Facebook (NASDAQ:FB), Netflix (NASDAQ:NFLX), Twitter (NYSE:TWTR) or Pinterest (NYSE:PINS) are also among the firms that should be on your radar. Although 5G isn’t their prime business, these companies will be beneficiaries of the new technology.
For retail investors, stock picking in a nascent sector can feel daunting. One way to invest in 5G stocks in a less risky way could be to invest in the industry via exchange-traded funds (ETFs), which are basket of securities — stocks, bonds, commodities or foreign exchange products.
An index, such as the S&P 500, typically tracks returns on a buy-and-hold basis. You typically can’t invest in an index directly, so over the past several decades, many ETFs have come to market that track various indices.
Several funds that would provide exposure to a range of 5G stocks would be the Defiance Next Gen Connectivity ETF (NYSEARCA:FIVG), First Trust Indxx NextG ETF (NASDAQ:NXTG), Global X Internet of Things ETF (NASDAQ:SNSR), or the SPDR S&P Telecom ETF (NYSEARCA:XTL).
In addition to niche ETFs, investors may want to consider funds with a focus on chip companies, which are among the drivers of the new technology. Semiconductors are the brains inside electronic devices. Frequent InvestorPlace readers will be familiar with the fact that most current models of 5G phones use chips manufactured by Qualcomm (NASDAQ:QCOM). The company holds a range of patents, copyrights and trademarks.
Seasoned investors realize how difficult it is to time the market or pick the big winners in a new sector early on. Therefore such exchange-traded funds may provide a diversified exposure to many robust companies with proven management and technology.
Diversify Your Portfolio
Research by Luigi Guiso and Tullio Jappelli of the European University Institute in Italy, highlights that, “many individuals invest in a few stocks… Besides failing to diversify across firms, investors also fail to diversify geographically, concentrating investments in home or regional assets.”
Therefore, we’d urge investors to consider having a diversified portfolio across asset classes, sectors and possibly countries. Several ETFs to consider could include the iShares ESG USD Corporate Bond ETF (NASDAQ:SUSC), which brings an environmental, social and governance (ESG) approach to investing in bonds, the Vanguard Real Estate Index Fund ETF Shares (NYSE:VNQ), or the WisdomTree U.S. MidCap Dividend Fund (NYSEARCA:DON), which may appeal to passive income seekers.
If you are looking for overseas business that may benefit from 5G deployment, you may want to consider the U.K.-based global carrier Vodafone (NASDAQ:VOD), Swedish networking company Ericsson (NASDAQ:ERIC) and Finland-based Nokia (NYSE:NOK).
China, the most populous country on earth, is also expected to see increased 5G use in the coming years. A fund to research would be the Global X MSCI China Communication Services ETF (NYSEARCA:CHIC). It is still early days for 5G in many countries. Yet industry analysts agree that the new technology will revolutionize communications worldwide.
Market participants should ideally diversify their capital across a range asset classes and companies in different industries and possibly also outside the U.S. Such a diversified approach would help decrease portfolio volatility and risk.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.