The Globe and Mail
5G has been the Next Mega Thing for more than five years, and telcos and other major tech providers have already spent billions preparing for it. But how big a deal is 5G? And as with any massive innovation, how should investors play it? Bet on established tech behemoths? Search for hot newcomers? Or a bit of both?
1. Thompson is VP, product strategy, at Evolve ETFs, launched in 2017, which aims to profit from big innovation trends and offer some some safety through diversification. Evolve manages about $3 billion, and 5G is one of eight equally weighted themes in its Innovation Index ETF. Even so, consumers likely “won’t notice a tonne of differences from 5G right away,” she says.
2. The headlines are somewhat true, Thompson says: China is ahead of North America in deploying 5G. But the U.S. is close behind. “Most American cities have access to 5G,” she says. And some individual companies, such as T-Mobile, have jumped ahead of rivals. That means North American investors can deploy money at home and don’t have to invest in Chinese companies.
3. Almost every sector will benefit. They include health care (monitoring patients at home in real time and sharing data through entire medical systems), retail (using augmented and virtual reality to better fulfill customer demand), automotive and entertainment. “Data is our most precious resource now, and 5G lets us transmit it faster than ever before,” Thompson says.
4. A key tech question still applies: What will Apple do? Thompson says 3G came onstream in the early 2000s, “but no one really knew what do to with it” until the iPhone arrived in 2007. Waves of new apps followed. She also likes a Henry Ford analogy: “If you asked people back then what they wanted, it would have been a faster horse, not a car.” Many new uses may not exist yet.
5. Investing in new tech is risky, and a long-term perspective is essential. The Innovation Index ETF has 42 holdings, but four are other Evolve funds that focus on themes such as the cloud and e-gaming. Investors get exposure to about 230 companies—a lot of diversification for a $65-million fund. Still, it’s down about 30% this year, versus 32% for the Nasdaq Composite Index.