Investing in the latest technology can bear fruit – but brings risk.
Ever wish you’d bought Apple stock in 1980?
When the tech giant went public at $22 a share, cordless phones had barely been invented and fax machines were standard office equipment. Investing in a California company that made something called a “personal computer” was a gamble.
Yet investors who are early adopters of the latest gadgets often relish this opportunity when building a portfolio. Known as Viewpoints investors, they embrace the chance to help change the world by furthering new technologies such as green energy or medical advances.
Even Luddites can see the value of getting in on the ground floor of a tech company destined to strike it big. Those original Apple shares? They’ve gone up a bit.
So where should you turn if you’re looking for today’s version of Apple?
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Options from AI to Xenobots
While there’s always the chance an individual technology may go the way of the VCR, the following categories may be poised for growth.
- Robotics: This term encompasses everything from humanistic machines to automation and artificial intelligence (AI). The technology is present on assembly lines, in surgical suites and behind the controls of self-driving cars, and the global market size is projected to reach almost US$190 billion in 2027. The COVID-19 pandemic has only increased demand for non-human workers. In the long run, robotics are likely to become even more popular in healthcare, whether as computerized assistants for the elderly or as implanted “xenobots” that treat disease with frog stem cells.
- Machine learning: This subset of AI teaches computers to process data like humans, with uses ranging from customer-service chatbots to voice-search tools to stock-trading platforms. As the technology continues to infiltrate our daily lives, the worldwide machine learning market is expected to top US$20 billion in 2024.
- 3D Printing: Also known as additive manufacturing, 3D printing bonds layers of material to create three-dimensional objects, whether that’s an aircraft part or a human organ. Although investors lost big when consumer applications fizzled in the past, industrial interest in the technology is currently on the rise, as 3D printing has the potential to reduce traditional manufacturing costs. Companies that produce the necessary hardware now dominate the multibillion-dollar industry.
Investment Example: The 3D Printing ETF (PRNT)
- Blockchain: The decentralized, digital database has already upended the banking sector by enabling cryptocurrencies such as Bitcoin. Investors are now turning to related industries, such as crypto trading platforms and sustainable mining, which uses green energy to satisfy the blockchain’s massive power requirements.
- Metaverse: Accessed via virtual reality headsets, this digital universe offers opportunities for shopping, socializing, entertainment and work. Crypto is likely to be the currency of choice in this market.
- Space: Investment in this once-final frontier is taking off. Beyond the quick flights for amateur astronauts, the space economy may offer opportunities for collecting solar energy, mining the Mars-Jupiter “asteroid belt” and even running hotels for intergalactic tourists.
Investment Example: The Procure Space ETF (UFO)
How to Finance the Future
Investors have several options for accessing the latest tech:
- Individual stocks: Buying shares in individual companies may yield big gains – or reveal a bad apple.
- ETFs and mutual funds: To help mitigate risk, many investors prefer to hold ETFs or mutual funds that provide exposure to new technologies with increased diversification. ARK Invest, for example, offers a variety of thematic ETFs.
- Private equity and venture capital: Institutional or high-net-worth investors may have access to venture capital funds that support privately held tech companies at early stages. The minimum financial commitment is often steep, and the risk may still be significant.
Even investing in the most cutting-edge tech requires the same traditional principles that have always applied: Determine your goals and risk tolerance before incorporating any strategy into your portfolio, and make sure to diversify.
Find out if investing in the latest technology makes sense for you.