NextGen investing made easy


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Speaking in millennial parlance, big tech is in! But firstly, let us understand what Big Tech is. Big Tech can be categorized as major technology companies that have an unparalleled influence on technology and indirectly our lives.

These are the most prolific and burgeoning companies of our times. Often big names like FAANG, i.e., Facebook1, Apple, Amazon, Netflix, and Google2, are considered members of this elite club.

These Big Tech companies are so vast in their operations that no other player is comparable to them. Most of us are consuming products of these FAANG companies in one way or the other like using a platform for ordering something from amazon or having social media account, etc.

If we look at the cumulative market cap of FAANG stocks is $7.07 trillion, which is double the size of India’s market cap (which stood at $3.46 trillion).

Furthermore, when we look at the next five players in the US, the market cap of (Microsoft, Tesla, Taiwan Semiconductor, NVIDIA, and Visa) stands at $4.83 trillion depicting tremendous difference and room for growth when compared to the top five players.

While these numbers are huge, these companies have been growing at a sustained pace and are commanding their own sweet share in the market.

For example – Facebook is possibly the largest social networking platform (this includes WhatsApp, Facebook, and Instagram). Similarly, Google is the undisputed leader when it comes to search engines.

Here’s a chart that depicts the growth story of these companies.
Source: EduFund Research Team
Note: Period under study is between Mar’19-Sep’21.

The revenues of these companies often surpass the value of the GDP of several countries.

For example, the revenue of Amazon and Apple both surpassed the value of the GDP of Pakistan (296 $ billion) by almost 90 $ billion and 69 $ billion respectively!

Source: EduFund Research Team

This undoubtedly shows us how efficient these companies are in their business operations and how well they’ll augur in the future. These companies’ most significant plus point is that they all are driven by data, the new ‘oil’!

These companies are sure to grow more in the future. Imagine if you had invested in these companies and how your wealth would have grown by now? But there’s absolutely no need to worry because we live in a world that is technology-driven.

In the words of Joseph Krutch,

‘Technology made large populations possible; large populations now make technology indispensable.’

This clearly shows us how indispensable technology is in our lives. The next big tech thing happening around us is next-tech. As the name suggests, various firms are investing heavily in new generation technologies like those shown below.

Let’s briefly go through these next-gen technologies. Internet, this is just unmissable! We all know how rapidly internet technology is progressing. 5G services are already up and running commercially in over 64 countries worldwide.

Robotics and AI is the new talking point of the industry. Automation and AI have helped solve several of the problems industries face and are sure to grow even in the future. Self-driving cars as a field have tremendous scope and future.

The future of automobile manufacturing is meant to be entirely automated. In 2020, the 3D printing industry was worth 13.7 $ billion. It is expected to grow to 63.46 $ billion by 2026, which means at a CAGR of 25% approx. This shows how resilient the future is. Various chipsets power today’s world. Almost all devices have a semiconductor chip installed, from a simple LED bulb to a complex supercomputer.

Thus, this industry is sure to flourish in the future. Unified Payments Interface (UPI) is living proof of how well and strong the fintech industry can grow. Fintech unapologetically has to be a next-gen industry.

We don’t want to miss the bus this time, right? There are several ETFs that invest in such future tech. Here are a few theme-based US ETF recommendations from us- 

Ticker Name  Segment  Name  1 Year Return  3 Year Return  5 Year Return 
DRIV  Equity: Global Mobility  Global X Autonomous & Electric Vehicles ETF  -0.02%  113.23%  N/A 
PRNT  Equity: Global Robotics & AI  3D Printing ETF  -29.95%  31.60%  25.64% 
SNSR  Equity: Global Internet  Global X Internet of Things ETF  1.54%  87.85%  102.81% 
ARKF  Equity: Global FinTech  ARK Fintech Innovation ETF  -44.17%  N/A  N/A 
FIVG  Equity: Global 5G  Defiance Next Gen Connectivity ETF  2.11%  N/A  N/A 
IGF  Equity: Global Infrastructure  iShares Global Infrastructure ETF  11.11%  19.57%  34.25% 
CIBR  Equity: Global Cybersecurity  First Trust NASDAQ Cybersecurity ETF  0.67%  80.84%  122.84% 

Investing in all the themes under one Roof!

Now since we have seen several theme-based ETFs, now let’s look at some ETFs that take care of all! The more diversity in the portfolio, the lower is the risk involved.

Below are the five ETFs that invest majorly in tech companies, these are not theme-based. The portfolio of these ETFs is diversified across tech companies:

Ticker Name  Name  Total Assets ($ B)  1 Year Return  3 Year Return  5 Year Return  3 Year Net Flows ($ B) 
QQQ  Invesco QQQ Trust  180.36  7.30%  110.74%  182.08%  36.55 
VUG  Vanguard Growth ETF  77.38  7.43%  93.76%  145.59%  7.84 
IWF  iShares Russell 1000 Growth ETF  67.23  8.43%  91.87%  152.41%  -7.70 
IVW  iShares S&P 500 Growth ETF  34.36  12.54%  87.50%  142.75%  -3.88 
TQQQ  ProShares UltraPro QQQ  19.17  8.46%  361.00%  721.84%  18.02 
Source: EduFund Research Team
Note: Data as on 30th Jan’22.

The above-listed funds have the highest Assets Under Management and provide investors with constant returns. Thus, these funds are ideal for investors seeking long-term capital growth.

What’s in it for Indian investors?

An Indian investor investing in the US market will be benefitted in two ways

(i). from the returns that have been generated by these ETFs

(ii). from the rupee depreciation3, which has been depreciating at 4% approx. annually for the past 10 years.

So, if the fund gives a 20% return and the rupee depreciates by 4% approx.., then the total gain will be 24% for the Indian investor.

Here’s a chart that explains how the rupee is depreciating over the period.

Source: EduFund Research Team.
Note: Period under study is between Feb’14 to Feb’22.

The big tech companies or tech-based ETFs have generated stable and healthy returns over the period.

So, as an investor, you should consider adding US ETF to your portfolio.

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