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My latest MoneySense Retired Money column looks at an investing theme that’s very popular in various newsletter services, and just now hitting the market: 5G, or Fifth Generation wireless Internet. Click on the highlighted headline to retrieve the full column: Investing in 5G.
One thing the Covid bear market has revealed is the popularity of technology in general, mostly epitomized by stocks trading on the Nasdaq exchange. True, the market has mostly recovered, but few think the tech wave is going away any time soon: certainly not the tens of thousands of young investors who flock to the Robinhood trading site.
5G is a key technology, not just for its own sake but because of several allied technologies it enables.
Recall that currently we are in 4G, which succeeded 1G, 2G and 3G. 1G was the technology that enabled the first cell phones; 2G brought text messaging, 3G was Internet access for cell phones and 4G higher speeds (albeit in overloaded networks.)
5G describes the technological innovations and infrastructure that will support the next era of connective technology. But don’t fall into the trap of thinking 5G is just 20% more powerful than 4G. In fact, it’s orders of magnitude more bandwidth, meaning blazing Internet speeds and almost no latency (waiting) times.
5G igniting explosion in AI, IOT, Blockchain and other technologies
The need for a quantum leap in Internet speed may have become apparent during the Covid lockdown, when the whole world discovered the benefits of work-from-home technologies like Zoom or Cisco’s Webex.
One thing that may ignite this next phase is the looming announcement by Apple Computer of a 5G-enabled iPhone. Investment newsletter pundits like Paul Mampilly of Profits Unlimited are touting an America 2.0 theme that leverages 5G through at least three related technologies that are taking off simultaneously: Blockchain, Artificial Intelligence and the Internet of Things (IOT). Also in the ascendant are allied technologies like cloud, computing, robotics, 3D printing and others. (This is illustrated in the graphic that kicks off this blog.)
For the portion of your portfolio allocated to this theme, I suggest a hybrid strategy of using 5G ETFs and perhaps cherry-picking a few of the names inside them. We mentioned one of these in the most recent edition of the MoneySense ETF All-stars, as well as the column on what to do with Covid savings: Yves Rebetez cited as his desert island pick an ETF bearing the ticker symbol NXTG on the Nasdaq. There is also an alternative one we didn’t mention called FIVG.
Either of these provide exposure to small (1% or so in each) positions in some lesser-known names that may or may not be ready to surge. But they also contain larger positions in names you may be familiar with, many of which pay solid dividends, making them suitable for Canadian RRSPs: names like Verizon and AT&T, or Canadian equivalents like BCE, Rogers or Telus.
Then there are so-called Tower REITs like Crown Castle and American Tower, or foreign telecom companies making comebacks based on 5G, like Nokia and LM Ericsson.
Another way to play these themes is to buy a semiconductor ETF, since many 5G and Second Gen Internet stocks are semiconductor makers like AMD, Micron, INVIDIA, Marvell Technology and Taiwan Semiconductor. Or you might buy something like the First Trust Computing ETF (SKYY/Nasdaq).
Keep in mind these are all technology stocks one way or another, an asset class Rebetez says can be as much as 30% of your overall stock allocation. He would not layer on more than an extra 5% specifically for 5G, although the Motley Fool service suggests 10% would work. (I recently wrote a special report on 5G for Motley Fool Canada, available only to subscribers.)
