How to Invest in 5G

Fifth-generation wireless, otherwise known as 5G, is a big deal, a highly anticipated next step in wireless service. If companies can distribute it as advertised, it has the potential to completely replace cable modems and traditional wifi, with benefits to any company – and its shareholders – involved with moving data across networks. If you’re interested in tech investment, this could be a good sector to assess. Here’s what you need to know. Consider working with a financial advisor as you buy stakes in cutting-edge industries or beef up your holdings in more conventional industries.

What Is 5G?

This emerging technology, and the subsequent sixth generation wireless, or 6G, already in progress, will let mobile networks behave in fundamentally new ways. If 5G works as anticipated it will run as fast as home wifi. Consumers will be able to use it for streaming, livecasting and other functions today largely reserved for a standard internet connection. (If you can seamlessly watch Netflix at the coffee shop right now, there’s a good chance it’s because your network has already been upgraded.)

The difference is that 5G, and the subsequent 6G, will let mobile networks run as fast as home wifi. Consumers will be able to use it for streaming, livecasting and other functions today largely reserved for a standard internet connection. If you can seamlessly watch Netflix at the coffee shop right now, there’s a good chance it’s because your network has already been upgraded. In that case, wireless carriers hope that their products will replace cable modems altogether.

O.K., so how should you invest?

Fifth generation wireless is not a proprietary technology, which means that there isn’t a single company that owns the underlying patents or architecture. For example, if you wanted to invest in the next generation of iPhone, we could easily direct you to Apple. Not so here, where what we’re talking about is a general technological step forward. Instead, there are several ways that you can invest in 5G technology as a general area.

Invest in Telecom Companies

The first way you could invest in 5G is by investing in companies that are building out these wireless networks, or that create products which use them. For example, you could invest in major wireless carriers like AT&T or T-Mobile, as these are publicly traded companies that build and operate wireless networks. You could invest in companies like Qualcomm and AMD, which create many of the hardware components essential to building 5G networks. Or you could invest in companies like Apple or Samsung, which build many of the devices which operate on broadband networks.

You could also choose to invest in companies that will ideally travel across this new architecture. If 5G pans out, consumers will be able to access high-bandwidth content from virtually anywhere. This will almost certainly cause an increase in business for demanding services like Netflix and Disney+.

Invest in Video Game Companies

Video game companies might benefit from 5G technology, but the margins there are more unlikely. Streaming games have proven difficult even over wifi connections and, while mobile devices are overwhelmingly the platform of choice for consumer gaming, they are limited by their hardware. Most likely this is a field which will benefit from 6G technology if it emerges as anticipated.

Invest in Internet-of-Things Companies

Finally, 5G will create significant opportunities for internet of things (IoT) companies. Latency, or the time it takes for data to travel from a server to a device, has been one of the major issues holding back physical concepts like self-driving cars and drone delivery systems. This is not the only issue, but it’s a big one. While this will likely help companies like Amazon, Google and Tesla, it will particularly create space for new entrants since IoT is an emerging field with little current application beyond monitoring and surveillance.

Invest Through Funds

While stocks can be rewarding they can also be high risk. Investors looking to smooth out their risk profile can consider ETFs and mutual funds that will reflect the risks and rewards of 5G technology.

As an investor you can approach this from several different ways. In most cases, however, you would likely pursue telecommunication-related funds like the Fidelity MSCI Communication Services Index ETF. This fund tracks the communications industry in general, holding assets such as AT&T, Charter Communications, Disney and Netflix. (Note that this is not a specific recommendation, merely an example.)

In other cases, you could pursue funds generally tied to the technology industry in general. Often investors choose to do so through Nasdaq-indexed funds, buying funds which track the Nasdaq Composite Index. This might be the right move if you feel that expanded wireless will help the technology industry in general, by making higher-technology available in more ways and places.

The Bottom Line

For some investors, 5G is a little bit like Gillette adding a sixth blade to its razors. There’ll always be another “G” for wireless networks to add right around the corner. And really, much technological hype tends to lead to disappointing results. That’s often down to what’s known as “commoditization,” the process by which innovative technologies turn into finished products.

But if companies can build and – especially – distribute it as advertised, it has the potential to completely replace cable modems and traditional wifi, with benefits to any company involved with moving data across networks. If 5G works as anticipated it will run as fast as home wifi. Consumers will be able to use it for streaming, livecasting and other functions today largely reserved for a standard internet connection.

And for investors that would be a much bigger deal than adding a sixth blade to a razor.

Investing Tips

The tech space has come to dominate the stock market in a huge way, with just a handful of companies churning out a full fifth of the S&P 500’s value. But should you take advantage of that? A financial advisor can give you valuable insight and guidance on that subject. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Now that we’ve talked about what you should look for, let’s take a walk in a whole new direction. Here are the top four mistakes that tech investors should avoid.