As 2021 kicks off and people form their investment goals for the year ahead, I want to share the rationale behind five technology verticals I’ll be weighting my investments toward. My sensible hat means that these are all ETFs that I not only think are going to perform well and maximise my financial returns, but that I also believe the rationale behind each one has a broader positive impact on society as well, so it’s a win for everyone.
The usually caveat applies: this isn’t financial advice, just my musings which for the most part seem to work out pretty well. I’m also not on commission for any of these ETFs (I really really wish I was), I just genuinely believe that they’ll do well.
ETF: CHRG by WisdomTree
Last 6 months growth: 59.43%
Climate change really hit the headlines in early 2020 before Covid stole the limelight. Greta even sailed across the Atlantic to scowl at Trump. And now Biden is counting down the days to the inauguration, having put climate change, and specifically renewable energy, at the heart of his environmental policy. The ongoing issue with renewables is how do you store the electricity for the times when the wind isn’t blowing or the sun is hidden by clouds?
Enter batteries. Scores of leading universities are spending serious research time on large scale batteries to support the roll out of renewable energy generating infrastructure, and this is only set to be boosted further by the host of national leaders with climate change on the agenda. The CHRG ETF backs a lot of the companies behind the battery revolution so expect high growth through 2021 as the Biden presidency kicks into gear.
Technology: AI and Automation
ETF: ARKQ by Ark Invest
Last 6 months growth: 57.27%
There’s nothing novel about investing in AI and robotics but this technology bucket continues to explode as companies like Nvidia see skyrocketing GPU sales and legacy monoliths like Walmart play catch up by integrating AI throughout their operations. Analysts like Forrester and Gartner project multiple times growth for this tech through to 2030 so I believe that there is still plenty of runway left, making it worth continuing to invest in the bandwagon.
There is no shortage of ETFs exposing themselves to automation technologies and to be honest if you look at the baskets across a lot of them they’re not wildly different, but the thing I like about ARKQ is that it is a slightly safer basket then more speculative AI ETFs (who would have thought that John Deere tractors would make it in?!). You might not see as wild gains or volatility as others but I’m backing this one as a reliable returner. This will also give you exposure to the TSLA fun if that’s what you’re after and even a dabble in Virgin Galactic.
ETF: BCHS by Invesco
Last 6 months growth: 74.44%
Is 2021 finally going to be the year when blockchain technology truly scales..? I’m hesitant, but that doesn’t mean it isn’t set for a year of further growth. Yes the pumping price of Bitcoin over the last few months has contributed to this ETF’s growth but there’s more going on with this technology I think is worth keeping an eye on.
The price of Bitcoin is rising however overall Google searches on the term remain relatively flat (compared to the 2017 bubble) suggesting that the majority of demand is coming from institutional investors. Jack Dorsey of Twitter fame is a huge backer, and his company Square now holds a significant amount of the cryptocurrency. Expect further institution scale investment taking the price up, and the value of the mining hardware companies held by this ETF with it. Similarly ETH 2.0 is set to finally launch which is touted to induce a step change in the adoption and industrialisation of the Ethereum blockchain. This technology is still on for big things…
Technology: Electric Vehicles and Driving Technology
ETF: ECAR by iShares IV
Last 6 months growth: 55.46%
A rising tide lifts all ships, and Tesla has been that pretty rapidly rising tide for the auto industry in 2020 seeing record sales and declaring its Level 5 autonomous driving technology “very close” to completion back in July of that year. The boom in electrification and autonomy have forced the other major auto-makers to step up a gear (pun fully intended), driving investments into self-driving and mapping start ups, as well as battery providers, so as not to get left behind.
Expect to see this ETF boom over the next few years as vehicle electrification pivots towards the norm and society starts to experience and normalise the idea of sitting in a car and not touching the steering wheel. Exposure to companies and Nvidia and Xilinx will bring success even if the autonomous driving revolution is a little slower off the starting grid.
Technology: Cloud Computing
ETF: SKYY by First Trust
Last 6 months growth: 50.34%
Even less novel than investing in AI is the idea of investing in cloud computing. By today’s standards this is pretty archaic technology — AWS launched in 2006… Although cloud has fuelled rapid growth companies like Instagram and Netflix over the last 10 years, you would be genuinely amazed by how slow a lot of big (and seemingly technologically competent) corporations have been with their migrations. For that reason, and the continued scaling of big tech, I’m still backing a lot of growth in cloud and distributed computing.
The SKYY ETF gives you exposure to the three largest cloud providers of AWS (Amazon), GCP (Google) and Azure (Microsoft) as well as a host of other cool backend companies that are quickly becoming the industry standard in software architecture like MongoDB, Splunk and Snowflake. Distributed computing is applicable across all industries as well so it’s rare that it’ll have a cloudy day.
So there you have it, five ETFs that cover five technology areas that I am backing for big things in 2021 and beyond. They’ve been a silver lining in my portfolio through 2020 for me already and I can’t see the momentum dropping any time soon.