Technology companies developed 5G as the successor to 4G technology, and after a decade of development, it finally became available in 2018.
Even then, it was only offered in very select cities throughout the United States in 2019.
5G became widespread in 2020, and we can expect that growth to continue in the future.
The most significant advantage of 5G technology is the much greater bandwidth and higher download speeds.
We’re just beginning to discover the potential that 5G technology could have.
Its capabilities could include self-driving cars, smart integrated cities, improved military technology, and more.
In total, the global 5G market may be worth $11 trillion by 2026.
This means there’s enormous potential for investors who buy into the best 5G ETFs now.
Why ETFs?
ETFs, or exchange-traded funds, are a cheaper alternative to mutual funds.
Most are maintained automatically using technology instead of managers.
They have lower annual taxable distributions and higher returns on average than mutual funds because they use mathematical algorithms to select the stocks in the fund.
ETFs carry lower risk than individual stocks because they are more diversified.
They are an excellent way for investors to benefit from growth in specific sectors.
By investing in 5G ETFs, you can benefit from the overall growth of this stock while insulating yourself from the risk of individual stocks.
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Best 5G ETFs
Defiance Next Gen Connectivity ETF (NYSEARCA: FIVG)
Defiance Next Gen Connectivity ETF is a 5G ETF that follows the Bluestar 5G Communications Index.
This index follows companies involved in the development and production of 5G technology.
It includes companies that make network equipment, cellular antennas and routers, cloud computing equipment, new radio technology, fiber optic cables, cell towers, and mobile network operators.
This ETF has 77 holdings, of which 82.5 percent are located within the United States.
There is nearly $1.2 billion spread among those stocks that the Defiance Next Gen Connectivity ETF manages.
Its top 3 holdings are Advanced Micro Devices, Inc. (NASDAQ: AMD), Analog Devices Inc. (NASDAQ: ADI), and Qualcomm Inc. (NASDAQ: QCOM).
These companies make up 7.56%, 5.86%, and 4.90% of the ETF, respectively.
Since its inception in March of 2019, Defiance has seen an average annual return of 28.86%.
Defiance Next Gen Connectivity ETF currently trades near its highest price ever at just under $38 per share.
There’s still plenty of potential for this ETF to grow, so now is a great time to invest.
Vanguard Communication Services ETF (NYSEARCA: VOX)
The Vanguard Communication Services ETF is a selection of 114 enterprises from the broader communications industry.
Most of the stocks in this ETF will directly benefit from the development of 5G technology.
The ETF manages approximately $3.6 billion in assets between those 114 companies.
Its top 10 holdings account for 68.6 percent of the ETF and include companies like Alphabet Inc. (NASDAQ: GOOG, GOOGL), Comcast Corp. (NASDAQ: CMCSA), AT&T Inc. (NYSE: T), Verizon Communications (NYSE: VZ), and more.
These companies give Vanguard a solid foundation to stand on.
Not all of the companies in this ETF are directly involved in 5G technology.
45.8 percent of its holdings are in interactive media, and it also has stocks in the movie and entertainment industries.
Companies like The Walt Disney Company (NYSE: DIS) provide diversity while also adding to the list of strong stocks.
Furthermore, this ETF has average 3-year and 1-year returns of 18.52% and 39.35%, respectively.
This ETF has eclipsed its pre-pandemic share price and is now trading at all-time highs.
It currently trades at around $140 per share.
Esoterica NextG Economy ETF (BATS: WUGI)
The Esoterica NextG Economy ETF is a relative newcomer on the scene with an inception date of March 2020.
Esoterica is an actively managed ETF that invests in domestic and international companies that directly affect 5G technologies.
Being active, WUGI averages 35 companies in its list of holdings and around $46 million in assets.
Although on the smaller side, the ETF has trended upward since launch.
Despite a share price of around $65 at present, Esoterica contains big names like Nvidia (NASDAQ: NVDA), Advanced Micro Devices, Inc. (NASDAQ: AMD), and Alphabet Inc. (NASDAQ: GOOG, GOOGL).
It has been outperforming some of the big ETFs of late and should likely continue to do so.
Top 5G ETFs
First Trust Indxx NextG ETF (NASDAQ: NXTG)
The First Trust Indxx NextG ETF tracks companies involved in the research and development of 5G technology.
This ETF is well-diversified, with everything from communication equipment to specialized REITs.
To show the power behind First Trust, every company in the ETF has a market capitalization of $500 million or more.
Its top two industry exposures include semiconductors and integrated telecommunication services.
These sub-sectors account for 24.69% and 20.03% of their total holdings, respectively.
Altogether, the First Trust fund has a total of 101 holdings.
First Trust features a global portfolio with United States businesses only representing some 38% of total holdings.
NXTG currently trades for just shy of $78 per share.
Investors should be aware of a relatively high expense ratio of 0.7%, but the vast earnings potential of the 5G market balances it out.
As the name implies, iShares U.S. Telecommunications ETF focuses solely on the top telecommunications providers in the United States.
IYZ contains a total of 21 different holdings from this sector.
You won’t be surprised to find names like Comcast Corp. (NASDAQ: CMCSA), Cisco Systems Inc (NASDAQ: CSCO), AT&T Inc. (NYSE: T), and Verizon Communications (NYSE: VZ) near the top of the holdings list.
These top four holdings make up 50% of iShares’ $400 million in total assets.
This ETF has been a bit slow-going of late, in no small part to underperformance by AT&T of late.
iShares has still seen an increase in share price of late, rising some 20% over the last year.
It is also to pay out a reasonable dividend yield of 2.9%.
iShares U.S. Telecommunications ETF is your likely pick if you want to invest directly in telecommunications.
5G Technology ETFs
Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSEARCA: SRVR)
The Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF consists of real estate companies that focus on the data and infrastructure sectors.
This ETF includes some of the largest cell tower REITs and data center REITs on the market.
The fund’s most significant holdings include Equinix Inc. (NASDAQ: EQIX) at 15.03%, American Tower Corp. (NYSE: AMT) at 15.03%, and Crown Castle International Corp (NYSE: CCI) at 14.21%.
The top 10 holdings in the fund account for 74% of the $1.6 billion in total assets.
Since its inception in May of 2018, the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF has had an average annual return of 14.35%.
The fund has an expense ratio of 0.6%, making it a little more expensive than some of the other selections on our list.
Pacer’s stock price has seen a steady rise over the last five years and is 15% up from last year at this time.
Its shares currently trade for just over $40 each.
Cheap 5G ETFs
The Global X Internet of Things ETF tracks the Indxx Global Internet of Things Thematic Index.
This index consists of companies that make products or services relating to the Internet of Things, or IoT.
IoT is a broad concept where physical objects contain the technology to connect with one another using the internet.
Comprised of 45 holdings, the fund is well-diversified both in terms of industry and location.
While the United States represents 50% of the companies within, several European companies and Taiwan help complete the list.
The top 3 industries of focus in this ETF are semiconductors (36.98%), electrical products (11.23%), and telecommunications equipment (9.97%).
The Global X Internet of Things ETF contains a range of different companies involved in IoT, which could benefit from expanding 5G technology.
The top 3 holdings are Dexcom Inc (NASDAQ: DXCM), STMicroelectronics NV (NYSE: STM), and Garmin Ltd (NASDAQ GRMN).
These account for 7.55%, 6.94%, and 6.54% of the total portfolio, respectively.
Additionally, the ETF has a relatively high expense ratio, at 0.68%.
This ETF is currently performing the best it ever has, trading for around $37 per share.
Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ)
A sister to the IoT ETF listed above, the Global X Artificial Intelligence & Technology ETF is well-diversified in its own right.
Artificial intelligence and technology companies are looking for new ways of streaming data so that information reaches its source even faster than before.
These companies recognize 5G technology as the means to get there, as 5G is over 20 times faster than 4G ever was.
Top holdings include Netflix (NASDAQ: NFLX), Nvidia (NASDAQ: NVDA), and Salesforce.com Inc (NYSE: CRM).
All in all, this ETF contains 85 different holdings, none of which have a significant percentage.
The industries most represented include internet software and services (21.57%), packaged software (20.69%), and information technology services (14.15%).
Like the Global X Internet of Things ETF, the Global X Artificial Intelligence & Technology ETF has a higher expense ratio of 0.68%.
It is trading a little lower at $31.59 per share and is up 30% from last year at this time.
Should You Buy 5G ETFs?
There will be trillions of dollars flowing into the 5G industry in the coming years.
Many companies will be relying on 5G technology to increase their bandwidth and download speeds, further boosting performance.
Across the board, 5G appears to be the next big thing, and investors who buy in now could see massive growth in their portfolios.
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5G ETFs: Final Thoughts
We’re just starting to see the true capabilities of 5G technology and how it can integrate into our lives.
Soon 5G will be an integral part of our phone, streaming, and social media usage.
Now is a great time to invest in 5G technology while it is still in its early stages.
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