The big deal is the fifth generation wireless network, otherwise known as 5G, the long-awaited next step in wireless service. If companies can distribute it as advertised, it can completely replace cable modems and traditional Wi-Fi with benefits for any company – and its shareholders involved in data transmission over networks. If you are interested in investing in technology, this may be a good sector to consider. Here’s what you need to know. Think about working with a financial advisor when buying stakes in high-tech industries or increasing your stake in more traditional industries.
What is 5G?
This new technology and the sixth generation wireless network, or 6G, which is already being implemented, will allow mobile networks to behave in a fundamentally new way. If 5G works as expected, it will work as fast as home Wi-Fi. Consumers will be able to use it for streaming, live streaming and other features that are now largely reserved for a standard Internet connection. (If you can watch Netflix in a cafe right now, it’s probably because your network has already been updated.)
The difference is that 5G and subsequent 6G will allow mobile networks to run as fast as home Wi-Fi. Consumers will be able to use it for streaming, live streaming and other features that are now largely reserved for a standard Internet connection. If you can now watch Netflix in a cafe, it’s probably because your network has already been updated. In this case, wireless operators hope that their products will completely replace cable modems.
How to invest in 5G
Okay, how to invest?
Fifth-generation wireless is not a patented technology, which means that no company owns major patents or architecture. For example, if you want to invest in the next generation iPhone, we can easily refer you to Apple. This is not the case here when we talk about general technological progress. Instead, there are several ways to invest in 5G technology as a general area.
Investing in telecommunications companies
The first way to invest in 5G is to invest in companies that build these wireless networks or create products that use them. For example, you can invest in large wireless carriers, such as AT&T or T-Mobile, as these are public companies that build and operate wireless networks. You can invest in companies like Qualcomm and AMD, which create many of the hardware components needed to build 5G networks. Or you can invest in companies like Apple or Samsung, which produce many devices that work on broadband networks.
You can also invest in companies that will ideally travel through this new architecture. If 5G expands, consumers will be able to access high-bandwidth content from virtually anywhere. This will almost certainly increase the activity of such demanding services as Netflix and Disney +.
Investing in a video game company
Video game companies could benefit from 5G technology, but profits there are unlikely. Streaming games has proven difficult even over Wi-Fi, and although mobile devices are the platform of choice for mass gaming, they are limited by their hardware. This is likely to be an area that will benefit from 6G technology if it comes as expected.
Investing in the Internet of Things company
Finally, 5G will create significant opportunities for Internet of Things (IoT) companies. Delay, or the time it takes to transfer data from server to device, is one of the biggest problems holding back physical concepts such as self-driving cars and drone delivery systems. This is not the only problem, but it is a big problem. While this is likely to help companies like Amazon, Google and Tesla, it will especially create space for new entrants, as IoT is a growing field with several ongoing applications in addition to monitoring and surveillance.
Invest through funds
While stocks can be beneficial, they can also be risky. Investors who want to smooth out their risk profile can consider ETFs and mutual funds that reflect the risks and benefits of 5G technology.
As an investor, you can approach this in several different ways. However, in most cases, you would probably look for funds related to telecommunications, such as the Fidelity MSCI Communication Services Index ETF. The fund tracks the communications industry as a whole, with assets such as AT&T, Charter Communications, Disney and Netflix. (Note that this is not a specific recommendation, just an example.)
In other cases, you can look for funds related to the technology industry in general. Investors often choose to do this through Nasdaq-indexed funds by buying funds that track the Nasdaq Composite Index. This may be the right move if you think that enhanced wireless will help the technology industry as a whole by making advanced technology available in more ways and in more places.
For some investors, 5G is a bit like Gillette, which adds a sixth blade to its razors. There will always be another “G” for wireless networks that can be added around the corner. And indeed, great technical excitement tends to lead to disappointing results. This is often due to what is called “commoditization”, the process by which innovative technologies are transformed into finished products.
But if companies can create it and – importantly – distribute it as advertised, it can completely replace cable modems and traditional Wi-Fi with benefits for any business involving moving data over networks. If 5G works as expected, it will work as fast as home Wi-Fi. Consumers will be able to use it for streaming, live streaming and other features that are now largely reserved for a standard Internet connection.
And for investors, this would be much more important than adding a sixth blade to the razor.
Technology space has become dominant in the stock market, and only a few companies produce a fifth of the value of the S&P 500. But should we take advantage? A financial advisor can give you valuable information and advice about this. Finding a qualified financial advisor is not difficult. The free SmartAsset tool connects you to three financial advisors who serve your area, and you can interview your advisors for free to decide which one is best for you. If you are ready to find an advisor to help you achieve your financial goals, start now.
Now that we’ve talked about what to look for, let’s take a walk in a whole new direction. Here are four key mistakes that technology investors should avoid.
Photo: © iStock.com / Jian Fan, © iStock.com / Edwin Tan, © iStock.com / metamorworks
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