Benefits and risks of investing in 5G stocks
Those interested in gaining exposure to 5G stocks must keep in mind that it's critical to understand both the benefits and risks of investing in these stocks.
Benefits
- 5G network development will overlap with various items from automotive technology and Industrial Internet of Things (IoT) to video games, providing investing exposure to wide swaths of the global economy.
- Investors can achieve portfolio diversification with 5G stocks.
- Some 5G stocks also offer considerable passive income opportunities.
Risks
- The rollout of 5G infrastructure may take longer than previously expected.
- A more advanced technology may emerge that impedes 5G's growth.
- Developing 5G infrastructure is a capital-intensive endeavor and may affect the profitability of companies that invest in spectrum licenses, towers, and equipment.
Methodology: How these stocks were chosen
For those interested in crafting a 5G-focused niche in their portfolios, a good approach is to pick up shares of companies with diverse exposure to the industry -- something these stocks all offer.
Starting with a leading semiconductor stock like Broadcom or Qualcomm is a great way to build 5G exposure. Identifying a leading mobile provider is a great next step that could lead investors to buy either Verizon stock or AT&T shares.
After that, investors will want to add an equipment or infrastructure stock. There are several routes to take, but some smart pickups might include Corning, Ciena, Arista, or Nokia. To complement these selections, a communications REIT -- such as American Tower, Crown Castle, or Digital Realty -- is a smart choice to round out 5G exposure, especially since they provide passive income.
The bottom line
While previous telecom network upgrades enabled the smartphone and mobility booms, 5G technology further entrenches digital technology in daily life. It overlaps with cloud computing, given that so many people now work from home.
5G is also unlocking new forms of entertainment, such as ultra-high-definition video, video game streaming, and virtual reality. Investors who are patient throughout the lengthy 5G deployment process may enjoy attractive long-term returns.