Market Decode: Some Surprising Ways to Invest in Tech

With Ehiwario Efeyini Senior Research Analyst Bank of America Global Wealth & Investment Management

Please see important information at the end of this program.  

Technology stocks have been top performers over recent years. In fact, since the 2008 financial crisis, the tech sector has outpaced the global equity market overall. 

(Source: MSCI All-Country World Index)

So it’s understandable that you might be wondering if it’s too late to invest in that growth. Short answer is, we believe it’s not too late. We think the technology sector still offers some of the best growth prospects in the current market.

Why is that? Well we see several trends that are having a major impact, both within the technology sector itself, and in more “traditional” industries that are using technology in innovative ways.

Take, for instance, the rapid growth in the “things” that are connected to the Internet. Smartphones, tablets and PCs are the most visible examples.  

But larger objects like industrial machinery, aircraft engines and water pipes, are also now connected to the “Industrial Internet,” or the “Internet of things.” And that’s transforming how a wide range of companies conduct business—from retailers to manufacturers to transportation firms.

As many as fifty billion objects worldwide could be connected to the Internet by 2020, and the data they generate is expected to double about every two years. 

(Source: Cisco IBSG)

And all this data is helping improve services and lower costs. 

Another area where technology is having a major impact is in healthcare, particularly in the field of genomics. Less than a decade ago, the cost of sequencing a human genome was over a million dollars; today it’s closer to a thousand dollars.

(Source: National Human Genome Research Institute) 

This is enabling new research into the links between an individual’s genes and conditions like cancer and heart disease. More personalized treatments are also now becoming available that would have been too expensive in the past. 

Now we also see technology-driven advances in alternative energy. Wind and solar power are now the fastest growing sources of electricity generation worldwide. (Source:  BP Statistical Review of World Energy; Data as of 2017)

And innovations in design and materials are helping to increase their efficiency.

For example, the cost of the average silicon solar module has been in half in recent years. And the cost of battery storage, for both grid power and electric vehicles, is also falling. And as these costs come down, demand is moving higher. 

(Source: Bloomberg)

We see a wide range of beneficiaries emerging from these trends—from Internet companies and biotech firms, to cloud service providers and makers of semiconductors and sensors. 

And as well as individual companies, a number of exchange-traded funds and mutual funds could also help to capture these growth areas—both within technology and also across other sectors and industries.

As always, the right approach will depend on your risk tolerance and time horizon. 

Many thanks for watching and please keep an eye out for more Market Decode videos.

 IMPORTANT INFORMATION

Investing involves risk including possible loss of principal.  Asset allocation, rebalancing and diversification do not ensure a profit or protect against loss in declining markets. Past performance is no guarantee of future results.

Investments focused in a certain industry may pose additional risks due to lack of diversification, industry volatility, economic turmoil, susceptibility to economic, political or regulatory risks and other sector concentration risks. Technology stocks may be more volatile than stocks in other sectors. The fund should be considered part of an overall investment program, and not a complete investment program. As with other investments, mutual funds are subject to market conditions and other associated risks. There is no guarantee that any specific fund or investment strategy will meet its investment objectives.  

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