How to Invest in 5G Stocks: The Future Telecom Network Technology
The innovation of 5G technology is the next step in the evolution of mobile communication
And, not surprisingly, many investors are interested in the technology.
Today, almost everyone has a cell phone that they can use to connect to the internet and communicate with anyone in the world in seconds. In the past decade alone, network speeds have risen and the amount of data that we use every day has increased.
Since there's money to be made, here is a basic background on 5G technology and the companies and stocks that are involved -- so that you have an idea where you can profit from th
What is 5G Technology?
5G stands for Fifth Generation. It is the fifth iteration of wireless communication standards. Currently, most phones and devices that connect to the cellular network use 4G technology.
Companies began rolling out 5G equipment in 2019 and expect to have more than 1.7 billion people connected to the 5G network by 2025.
5G is an exciting development in mobile communications because of its high speed. 5G is theoretically capable of handling up to 10 gigabits of data per second.
This is fast enough to download a two-hour, HD movie in less than five seconds.
By comparison, current 4G technology can only handle up to 0.3 gigabits of data per second, though in practice speeds are closer to 0.1 gigabits per second.
This higher speed means customers will be able to download things like music and movies more quickly. It also makes 5G a legitimate competitor in the realm of home internet service as its potential speeds can compete with the speed of a wired internet connection.
What Companies are Involved in 5G Technology?
Almost every major wireless communication technology is involved in 5G. Cell phone providers like Verizon and AT&T are involved, rolling out 5G networks and offering 5G service to customers.
However, there are many lesser-known companies that are playing a big role in the rollout of 5G.
While service providers need to exist to build infrastructure and offer customers a subscription to connect the network, there are companies that produce 5G equipment or are involved in other ways.
For example, companies like Broadcom and Qualcomm make semiconductors that go in phones and wireless equipment. American Tower Corp. owns many cellphone towers and leases space on those towers to cellular providers.
Even Apple is involved in that it builds iPhones that people will use to connect to the 5G network and designs the software those phones use.
Because so many companies are involved in 5G, there are lots of ways for investors to invest in the new technology.
Among the big names are:
- Qualcomm (QCOM)
- AT&T (T)
- Verizon Communications (VZ)
- Apple (AAPL)
- American Tower Corp. (AMT)
- T-Mobile US (TMUS)
All investments are subject to risk, and that includes investing in 5G.
One of the risks of investing in any technology is that it will be superseded by another technology or that the technology you invest in will fail to get adopted as a standard.
The good news for 5G investors is that 5G has been adopted as a standard by many governments across the world, making it unlikely that another communications technology will push 5G out of the market.
One real risk is that many of the industries related to 5G technology, including computer chip and semiconductor construction, are cyclical.
The success of these businesses waxes and wanes, so you might find yourself having to hold your investments for the long-term to earn a return.
Another risk is that 5G technology won’t fulfill all of its promises.
The technology is exciting and the thought of replacing wired internet service to homes, especially in remote areas, with a fast wireless connection is a huge deal.
However, if the technology winds up not being capable of providing competitive home internet, or otherwise fails to live up to the hype, you could lose some of the money you’ve invested.
Ways to Invest in 5G Technology
There are a few ways that you can invest in 5G technology.
One option is to invest directly in a company that is involved in 5G technology.
For example, you could purchase shares in a company like AT&T or Qualcomm. These companies have many products and services that they offer, but if their 5G products succeed, there’s a good chance that their stock values will rise.
Before you invest in any individual stock, you need to research the company and do your due diligence. Each investor's research strategy is slightly different.
Some investors use a technique called fundamental analysis. This involves looking at things like a company’s revenue, debt, profit, and other statistics to try to arrive at a fair value for the company.
If the company’s current stock price is below the calculated fair value, it might be a good opportunity to buy shares.
Fundamental analysts often tend to look at a company’s competition and how they stack up against competitors.
Other investors use technical analysis. This involves looking at stock charts to try to identify patterns in the stock’s price history.
Technical analysts believe that these patterns can help them identify future changes in a stock’s price, giving them indicators as to when to buy and sell.
Mutual Funds and ETFs
One of the primary risks of investing in a single stock is a lack of diversification. If you put all of your money into one company and that company goes under, you’ll lose your entire investment.
If you split your money evenly between five companies, even if one goes bankrupt you’ll only lose 20% of your investment. This makes diversifying your portfolio an important part of reducing investing risk.
One popular way to easily build a diversified portfolio is by investing in a mutual fund or ETF. Mutual funds own shares in dozens or hundreds of companies, but you only have to own shares in the mutual fund. That makes them one of the easiest ways to diversify.
There are many different types of mutual funds.
Some try to replicate specific market indexes, like the S&P 500 or the Dow Jones Industrial Average.
Others focus on specific industries like technology or communications. Communications funds and ETFs are likely your best bet if you want to invest in 5G technology.
How to Buy Shares
If you’ve decided that investing in companies that are involved with 5G technology is right for you, here’s how to do it.
Open a brokerage account
The first thing you have to do is open a brokerage account.
Brokerage companies are companies that facilitate investment in stocks, bonds, ETFs, mutual funds, and other securities.
There are many brokerage companies out there, each with its pros and cons.
Some companies, like Vanguard and Fidelity, run brokerage accounts and run their own mutual funds and ETFs.
Most offer perks, like waived fees if you invest in their mutual funds. If you know what fund you want to invest in, that could affect the brokerage you choose to work with.
Once you’ve decided on a brokerage company, it’s time to open an account. This usually involves filling out an application form that asks for some information about you. You also have to link a bank account so you can transfer money to your brokerage.
Place a buy order
Once your account is open and funded, it’s time to buy shares. The way that you do this is by submitting a buy order.
There are two types of buy orders you can use: market orders and limit orders.
Market orders are more common and simpler. With this order, all you have to do is specify the number of shares you want to buy. Your brokerage will buy those shares for you at the cheapest price available.
Buy-limit orders are a bit more complex. With a buy-limit order, you specify the number of shares to buy and the maximum price you’ll pay. Your broker will buy those shares at the cheapest available price, but not if the cheapest price available is above your limit.
In general, it’s easier to place a market order, but buy-limit orders let you avoid the risk of paying more than you expected to pay for shares. This isn’t a common issue unless you’re trading a stock that doesn’t see much trading volume.
The drawback of limit orders is that they run the risk of not going through at all. If the share’s price jump above your limit and don’t come back down, you’ll never buy the shares.
Consult an Advisor
It’s important to remember that all investing is subject to risk.
Before making any investment, it’s a good idea to consult with a financial advisor to make sure that you’re on track to reach your financial goals.
If you want to invest in individual companies, make sure that you’re only doing it with money you can afford to lose. It’s generally best to keep things like your retirement fund in safe, diversified investments.