Has tech peaked? 💾 👨💻
This newsletter focuses on investing in technology companies.
In this newsletter:
- 5 headlines that pretty much sum up the week
- These are the beanie babies of our generation
- Your playbook on investing in tech
- Our rec of the week
Five headlines that sum up the week 🚀 📈
1. Your neighborhood Walmart will no longer serve McDonald’s
Hundreds of McDonald’s locations are being shut down across Walmarts in the U.S. The reason cited was mutual. More Walmart customers are buying their groceries online, removing the need to step into a store, while McDonald’s diners, understandably, opt for the drive-thru window. Unless you’re near one of the lucky 150 stores, you’re going to have to get your McFlurry fix the old fashioned way.
2. Alabama voters have, so far, voted against Amazon’s unionization
The highly publicized union vote for Amazon workers in Alabama has finally commenced, and the results are pretty straightforward. With over 3,000 votes cast, half of which have been counted, around have 70% voted against unionization. Counting resumed this morning and will most likely wrap up at the end of the day.
3. Lawmakers aren’t thrilled about Instagram for kids
Last month, Zuckerberg confirmed that Facebook is developing a version of Instagram for kids under the age of 13. Some lawmakers do not think this is a good idea, especially since there has been recent criticism of bullying, abuse and predation that teens experience on the platform. Lawmakers have asked for more information regarding the initiative and requested that the company not move forward with it. We aren’t psychic but we imagine Facebook’s response will be something like this:
4. GameStop announced plans to sell 3.5 million shares
This announcement came on Monday, which consequently led shares to plunge. This sale could earn the company $600 million in capital, which is said to be used to “further accelerate its transformation as well as for general corporate purposes and further strengthening its balance sheet.” Despite most brick and mortar storefronts closing in the last year, GameStop disclosed that sales have increased by 18% from a year ago.
5. Boeing’s 373 Max has more problems
Boeing has grounded its 737 Max again after discovering yet another problem – this time with its electrical system. In the context of planes, this is “roughly analogous to the circuit breaker panel in a house.” This setback has resulted in 16 planes being pulled while the issue is resolved. It’s unclear how much this will cost the company or impact shares, which have been down all week. So far, the company has lost $20 billion from grounding its planes between March 2019 to November 2020.
ICYMI: COVID-themed toys are flying off shelves
With nearly 20% – approximately 66 million – of the U.S. fully vaccinated, there is hope that COVID will soon be a distant memory. To commemorate this fraughtful time, COVID-themed toys have materialized on the internet. One in particular, from U.S. manufacturer Squishable, is called Mysterious Doctor Plague.
The response? Total virality.
The Amazon reviews were noteworthy. One states it’s “an adorable way to remember the worst year ever!”
Since its inception, Mysterious Doctor Plague has been restocked several times. Its entire line of products accounted for 32% of Squishable’s internet sales last year. Sales also increased by 200% from the year before. In response to its success, Squishable expanded its selection to include a plague nurse. While strange, it’s been highly profitable for the company – and it’s only starting to catch on now.
Why technology is such a popular investment
- Tech stocks and ETFs are shares in companies in the technology sector, including computer hardware and software, IT, communication, and even AI
- Tech stocks draw investors in due to their newness, excitement, and innovative approach – but you don’t have to just involve in tech stocks to invest in tech advances (think Tesla and Amazon)
- Due to high demand, tech stocks offer great growth potential – at high risk and (often) even higher prices
- One of the best ways to get involved in tech stocks as an individual is to invest in tech-based ETFs and other funds
The tech sector is enormous. When you talk about “tech stocks,” companies like Microsoft, Apple, and maybe even Netflix probably spring to mind. But the tech sector is much more than consumer goods – the sector also includes telecommunications, information technology (IT), semiconductors (think: chips), AI and blockchain. This gives investors more options than they can count – and it’s only going to get bigger.
Why Invest in Tech
Tech companies offer newness, excitement, and innovation that other industries simply can’t match. And as they look to the future with new technologies and platforms, their stocks tend to charge upward in the market (at least for a time).
Investing in tech also gives individuals a chance to invest in brands that play a major role in their lives. It also offers unique opportunities for growth, income, and value strategies – in the same share.
For instance, investing in a mature tech company like Apple will not only generate dividends, but likely both short- and long-term growth. And for individuals seeking greater bursts of short-term growth, investors can choose from an ever-expanding field of younger, more exciting capital ventures (at higher risk).
Types of Tech Investments
When it comes to investing in tech, looking beyond the elites helps diversify your portfolio and may even lead to higher returns. To that end, it helps to consider tech investments by industry and gain an idea of your options.
- Involves business, enterprise, and consumer platforms and installable applications
- 2020 was a boon for many software purveyors due to the sudden influx of work-from-home arrangements
- Even in non-pandemic years, established and essential software companies enjoy steady growth – think Microsoft, Adobe, and Salesforce
- Covers those who manufacture, sell, and repair computers, smart devices, printers and scanners, televisions, and related components
- Different facets of the hardware sector perform at varying levels; just look at HP’s struggling printer division against Apple’s significant growth
- Other major players in the field include Sony, Samsung, Dell, and Panasonic
- Telecommunications encompasses all the companies that participate in a massive game of global telephone, including phone and broadband networks
- Has seen some negative growth in recent years
- Some of the biggest names include giants like AT&T, Verizon, and Deutsche Telekom
- Due to their versatility and the market’s need for these products, they often produce stability and significant returns
- Production concerns, global politics, and supply chain issues can affect their performance in short-term stints (such as right now)
- Big names include NVIDIA, Intel, and AMD
- Recently received a lot of hype when Bitcoin shot up over $50,000, led by a spike in investor interest and a few well-timed tweets by Elon Musk
- This area of the market is new, volatile, and largely unregulated – and that’s what some investors like about it
- While the future of blockchain technology is uncertain under recent scrutiny, some investors think it’s still worth the risk
- A newer sector in tech that comprises deep learning, machine learning, and other instances of computers performing non-mathematical tasks
- Popular applications of AI include Amazon’s Alexa or Apple’s Siri
- We use AI to run models and calculations of investments to determine the best place to put your money for long-term growth
Where to Start Investing in Tech
When it comes to investing in tech, you can get started in a few ways. The most obvious is to buy individual shares via a broker or online investment platform.
Investing in ETFs is another increasingly popular option, as it allows you to spread your risk and hold a few more securities in one go. Plus, you typically need less starting capital to invest – tech shares often price in triple and quadruple digits, whereas you can invest smaller dollar amounts into an ETF.
The bottom line
Investing in tech can offer short and long-term growth. The sector is divided into several factions, but that doesn’t necessarily mean your portfolio is diversified as a result. If you’re apprehensive about stock picking, there are numerous ETFs that focus on specific types of tech stocks as well as the sector as a whole.
Visit our Learning Center for the full “Investing Explained” resource
We like infographics. We also like ESG. If you’re not totally sold on this type of investment, this infographic breaks down the short and long-term benefits of ESG stocks and ETFs, and makes a data-driven case for why you should add it to your portfolio.