5G adoption is ramping up.
According to estimates from a 2021 Ericsson mobile industry report, 5G smartphone subscriptions worldwide will finally top 500 million by the end of this year, more than double the level from 2020. Furthermore, 5G subscriptions in 2022 are predicted to double again to top 1 billion — a crucial adoption milestone that will be achieved about two years faster than we saw with 4G adoption. If your device is capable of 5G, however, it doesn’t guarantee that you can use its next-level connectivity in your current location. As a result, many investors are banking on a big telecom push in the coming years to bring infrastructure up to speed. If you’re interested in playing this 5G megatrend, here are eight diversified exchange-traded funds that are worth a look.
Vanguard Communication Services ETF (ticker: VOX)
The largest telecom-related ETF out there by a long shot, this nearly $5 billion Vanguard fund is the way to go if you want simple exposure to the big names in the space. The fund boasts more than 110 total names, offering a simple and liquid way to cover all your bases on players in the 5G revolution. But just be aware that while service providers such as Verizon Communications Inc. (VZ) and AT&T Inc. (T) are near the top of the list, you’ll also find cloud computing and software giants such as Google parent Alphabet Inc. (GOOG, GOOGL). While not involved in hardware, stocks like these are still players in the modern telecom space along with media companies such as Netflix Inc. (NFLX) that will gain customers in an increasingly connected world.
Defiance Next Gen Connectivity ETF (FIVG)
You may not recognize smaller ETF operator Defiance, but this $1.4 billion fund is established enough to warrant a mention before other funds sponsored by bigger firms. The ticker says it all, with the ETF taking a more tactical approach to zero in on the firms that are building tomorrow’s 5G infrastructure. These include chipmakers you may recognize, such as Advanced Micro Devices Inc. (AMD) and Qualcomm Inc. (QCOM), along with more specialized plays such as Keysight Technologies Inc. (KEYS), a company that manufactures electronic testing and measuring equipment to optimize 5G hardware. With 88 total holdings and not a lot of exposure to the carriers themselves, this is a targeted play on infrastructure spending and not the broader business of telecom.
First Trust IndXX NextG ETF (NXTG)
Another infrastructure-focused ETF, this roughly $1 billion fund is also well established despite being operated by the smaller asset manager First Trust. Its “NextG” focus indicates that it’s a play on the ever-evolving business of telecom and not just a way to capitalize on the current leaders and near-term shift to 5G. That makes for a more dynamic list of components including Xilinx Inc. (XLNX), a supplier of programmable logic devices, including chips that can be programmed after their initial manufacturing to provide next-generation flexibility. The fund also holds international tech firms such as India’s Tech Mahindra Ltd. (TECHM). There’s a slightly higher risk profile here given that you’re not getting as many entrenched names, but for investors interested in the big potential of 5G, that could be a good thing.
Fidelity MSCI Communication Services Index ETF (FCOM)
This Fidelity communications fund comes in at around $900 million in total assets. That makes it slightly smaller than the prior funds as of this writing, but still a big enough fund to be taken seriously. You’ll find the same bias toward large and established stocks that was in the leading Vanguard telecom fund, but here you’ll find a bigger focus on content with the top three positions being Facebook operator Meta Platforms Inc. (FB), Alphabet and Walt Disney Co. (DIS). All have a role to play in a connected world, particularly GOOG and FB, as constantly connected people offer up plenty of monetization opportunities. But the distinction is worth flagging in case you want more traditional communications firms in the mix.
iShares US Telecommunications ETF (IYZ)
This smaller iShares ETF is valued at about $400 million. But unlike VOX and the prior Fidelity fund, this dedicated telecom fund cuts out the Big Tech leaders that are near the top of some other funds and instead goes all-in on the actual telecom service providers. There’s risk there too, of course, with roughly 35% of the fund in big names such as Comcast Corp. (CMCSA), Verizon and AT&T. If you’re not afraid of this focused approach, then IYZ is the best way to play actual connectivity providers instead of secondary players.
iShares Global Telecom ETF (IXP)
One of the few telecom funds on this list with an international flavor, this 5G ETF looks beyond domestic stocks with nearly a third of its assets in international carriers or service stocks outside of Silicon Valley. Sure, the usual suspects do make an appearance on this list and the lion’s share of assets are still dedicated to U.S. corporations, but stocks such as Asian internet giant Tencent Holdings Ltd. (TCEHY) and Tokyo tech powerhouse SoftBank Group Corp. (SFTBY) are also among its top positions. This offers a slightly more diversified footprint in this fund for those who want to look beyond just U.S. investment in 5G technology.
Global X Internet of Things ETF (SNSR)
Valued at roughly $500 million, this Global X fund is a secondary play on the 5G revolution in that it is an investment in the future of connected electronics beyond traditional smartphones and tablets. The idea of the “internet of things” has been around for a while now, and refers to a network of objects connected to the web. Maybe a few years ago you would have scoffed at this notion, but with the rise of smart TVs, digital thermostats and doorbell cameras, it’s clear that this is the direction we’re moving in as a society. Top holdings help facilitate the connected future, including wireless technology chipmaker STMicroelectronics NV (STM), health care sensor firm Dexcom Inc. (DXCM) and GPS giant Garmin Ltd. (GRMN) to name a few. If you’re mostly interested in how people will be using 5G — and which high-tech firms will capitalize on the new technology to meet new markets — SNSR could be the right fund for you.
Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR)
This $1.5 billion fund is the second largest on the list, but it’s listed last as it’s another tangential play on 5G technology. SRVR invests in companies that generate the majority of their revenue from real estate operations in the data and infrastructure sector, meaning firms that own the actual buildings with servers or the land on which telecom towers are built. After all, all that information that’s in the cloud does need to be digitally stored in a physical location somewhere and sent to your phone or laptop quickly when you want it. SRVR is a play on these data-focused real estate companies with holdings such as telecom tower operator Crown Castle International Corp. (CCI) and data center giant Equinix Inc. (EQIX). It’s admittedly a narrow niche with roughly 25 holdings in total. But given the size of this fund, there’s clearly appeal on Wall Street for this strategy.
Here are the eight best 5G ETFs to buy:
— Vanguard Communication Services ETF (VOX)
— Defiance Next Gen Connectivity ETF (FIVG)
— First Trust IndXX NextG ETF (NXTG)
— Fidelity MSCI Communication Services Index ETF (FCOM)
— iShares U.S. Telecommunications ETF (IYZ)
— iShares Global Telecom ETF (IXP)
— Global X Internet of Things ETF (SNSR)
— Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR)
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8 Best 5G ETFs to Buy originally appeared on usnews.com
