For the part of your portfolio that is dedicated to this theme, I propose a hybrid strategy that uses 5G ETFs and possibly chooses some of the names in them. We have one of them in the latest edition of MoneySense Best ETFsas well as the column What to do with COVID savings: Yves Rebetez quotes an ETF with the ticker symbol NXTG on the Nasdaq as his deserted island. There is also an alternative that we didn’t mention at the time: FIVG.
Both offer exposure to small (around 1% each) positions in some lesser-known names that may or may not be ready to fluctuate. But they also have larger positions in names you may be familiar with, many of which pay solid dividends and are therefore suitable for Canadian RRSPs: names like Verizon and AT&T or Canadian equivalents like BCE, Rogers or Telus.
Then there are so-called “Tower REITs” like Crown lock and American toweror foreign telecommunications companies celebrating 5G-based comebacks, such as Nokia and LM Ericsson. You can also do what I do by buying some of these one at a time: put the US dividend payers in your RRSP and the Canadian dividend payers or foreign non-dividend payers in TFSAs or unregistered accounts. These ETFs own little Canadian stocks, though Shopify shows up a lot.
Another way to play these themes is to buy a semiconductor ETF, as many internet stocks are in 5G and second gen semiconductor manufacturers like AMD, Micron, NVIDIA, Marvell Technology, and Taiwan Semiconductor. At least nine ETFs focus on semiconductors, which are primarily traded on US exchanges. The largest is the iShares PHLX Semiconductor ETF, which is traded under the ticker on the Nasdaq SOXX.
Or you can buy something like the First Trust Computing ETF (SKYY/ Nasdaq), which owns some of the big FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) as well as trendy new cloud talents like Cloudera, Fast and even Shopify.
Remember, these are all technology stocks in one way or another. An asset class that Rebetez says can represent up to 30% of your total equity allocation. He wouldn’t stack up more than 5% specifically for 5G, although The Motley Fool service suggests 10% would work.
I see 5G as a long-term trend, as do the spin-off technologies that make it possible. Even as a retiree in need of dividend income, I would love to hold the above telecom games and tower stocks indefinitely if they pay dividends of 2% or 3%. However, if some of your more speculative small-cap flyers paid off, I’d be quick to sell half a double pack and then play with the house money (a common tip from Mad Money’s Jim Cramer and one my daughter frequently throws back in my face !).
If these issues result in constant profits, remember to rebalance each year to ensure your asset allocation doesn’t get too out of whack. This is doubly true for retirees who should continue to have a good share (50% or even 60%) in fixed-income securities.
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