Disruptive Technology

Technology influences everything we do today. From our smartphones and computers to advances in medical devices to satellites and cars, technology is everywhere. Technology has become integrated into just about every industry segment today. So it’s only natural for investors to think about investing in such a theme. 

It's not that we use technology, we live technology.

Godfrey Reggio

Investment categories

One way to invest in the technology sector is via technology-based ETFs and mutual funds. Investors looking to invest in technology, look at companies engaged in one or more aspects of technology. Some tech examples include:

Artificial Intelligence Artificial intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The term may also be applied to any machine that exhibits traits associated with a human mind such as learning and problem-solving. The ideal characteristic of artificial intelligence is its ability to rationalize and take actions that have the best chance of achieving a specific goal. (Investopedia.com)

Automation & Robotics

Robotic process automation (or RPA) is a form of business process automation technology based on metaphorical software robots (bots) or on artificial intelligence (AI)/digital workers. It is sometimes referred to as software robotics. Academic studies (London School of Economics) project that RPA, among other technological trends, is expected to drive a new wave of productivity and efficiency gains in the global labour market. Although not directly attributable to RPA alone, Oxford University conjectures that up to 35% of all jobs might be automated by 2035. 

Blockchain A blockchain is a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. A number of applications are built on the blockchain. Blockchain applications provide a wide variety of solutions the companies need to improve business. The demand for these technologies and applications are still dramatically growing. Consider the 5 most common examples: smart contracts, recruitment process, faster and cheaper payments, reliable identity management, and marketing campaigns. (The Economist)

Cyber Security

Cybersecurity is the practice of protecting systems, networks, and programs from digital attacks. These cyberattacks are usually aimed at accessing, changing, or destroying sensitive information; extorting money from users; or interrupting normal business processes.

The importance of cybersecurity is a primary theme during budget planning and allocation.  Companies attempt to acquire the best cyber defenses available. Just implementing simple security tools like firewalls and antiviruses is not sufficient today because threats have grown in scope, sophistication, and strategy. Moreover, according to the FBI’s May tally in 2015, Business Email Compromise scams have cost businesses over $12.5 billion in the last four and a half years. These make cybersecurity providers be critical than ever before. (Cisco)

Digitalisation, IoT and Cloud Technology

Digital transformation has been on the agenda of organizations for years and 2018-2020 is predicted to be a crucial time for leaders to plan for and implement it across industries. Digitisation is the process of converting information from a physical format into a digital one. When this process is leveraged to improve business processes, it is called digitalisation. The Internet of Things refers to the billions of physical devices around the world that are now connected to the internet, all collecting and sharing data. Thanks to the arrival of super-cheap computer chips and the ubiquity of wireless networks, it’s possible to turn anything, from something as small as a pill to something as big as an aeroplane. Cloud computing is the on-demand availability of computer system resources, especially data storage and computing power, without direct active management by the user. All tech companies involved in such a theme are in high demand. 

FinTech

Financial technology is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. It is an emerging industry that uses technology to improve activities in finance. The use of smartphones for mobile banking, investing, borrowing services, and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public. 

Fintech is one of the hottest sectors with a lot of investor and consumer interest. There is a massive explosion of startups, and, even though most of them will fail (just a statistical fact since ~90% of startups fail), the strongest and most promising disruptors with scalable businesses will remain and will change the landscape of financial technology significantly. As Fintech in is dynamic and is growing rapidly, responsiveness for businesses will become crucial to keep up with the growth.

Future Mobility Ecosystem

Frictionless, automated, personalized travel on demand—that’s the dream of the future of mobility. And the future mobility ecosystem’s various elements are coalescing to realize that dream sooner than expected, which means that incumbents and disruptors need to move at top speed to get on board. (Deloitte)

Genetics and Biotechnology

Advances in understanding plant biology, novel genetic resources, genome modification, and omics technologies generate new solutions for food security and novel biomaterials production under changing environmental conditions. Biotechnology has helped improve the quality of people’s lives for over 10,000 years. Today’s biotechnologies vary in application and complexity. However, the fundamental aim of biotechnology is to meet human needs or demands in order to improve our quality of life.

Smart Cities

A smart city goes beyond the use of information and communication technologies (ICT) for better resource use and less emissions. It means smarter urban transport networks, upgraded water supply and waste disposal facilities and more efficient ways to light and heat buildings. It also means a more interactive and responsive city administration, safer public spaces and meeting the needs of an ageing population. (European Commission)

Smart city concepts and technologies will no longer be separable from the built urban structure in the future.

What Are the Risks Involved?​

There are always market and economic risks associated with investing. Beyond this, some of the risks with tech companies include:

  • Product or service obsolescence. Tech, by its nature, is a fast-moving and ever-changing business. Consumers and businesses want the latest and best products. If a tech company’s technology isn’t cutting edge, then the business may suffer.
  • Economic factors. These can impact spending on technology by both businesses and individuals. An economic slowdown can impact even high-flying tech stocks.
  • The company’s financial strength. Like any stock, the underlying financials of tech companies are crucial. Is the company profitable? How is their balance sheet? Do they have sufficient cash flow?

Some Tech Companies to Consider in ETFs and Mutual Funds

Apple-Logo

Apple, Inc. engages in the design, manufacture, and sale of smartphones, personal computers, tablets, wearables and accessories, and other variety of related services.

Microsoft-Logo-2012-present

Microsoft Corp. engages in the development and support of software, services, devices, and solutions. It operates through the following business segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.

Cisco-logo

Cisco develops, manufactures and sells networking hardware, software, telecommunications equipment and other high-technology services and products.

Nvidia_logo

Nvidia Corporation designs graphics processing units for the gaming and professional markets, as well as system on a chip units for the mobile computing and automotive market.

tesla_logo_PNG9

An American electric vehicle and clean energy company based in Palo Alto, California. Tesla’s current products include electric cars, battery energy storage from home to grid scale, solar panels and solar roof tiles, and related products and services.

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PayPal Holdings, Inc. is a worldwide online payment system that supports online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders.

Alphabet-Logo

Alphabet Inc. was created through a restructuring of Google on October 2, 2015, and became the parent company of Google and other businesses including X Development, Calico, Nest, Verily, Fiber, Makani, CapitalG, and GV.

1000px-Mastercard-logo

Throughout the world, its principal business is to process payments between the banks of merchants and the card-issuing banks or credit unions of the purchasers who use the “Mastercard” brand debit, credit and prepaid cards to make purchases.

Instruments to Invest in Technology Impact