Thematic investing: Tech & and the Fourth Industrial Revolution
New technology impacts our lives daily, but what about investing. The fourth revolution is coming and may present some of the best investment opportunities for you.
Thematic investing & the Fourth Industrial Revolution
What is the Fourth Industrial Revolution?
You might be asking yourself “why should I invest my money in this sector?”. Thematic investing is, like the name suggests, picking stocks and companies to invest in based around a particular theme. In this case, we’re talking about the Fourth Industrial Revolution (4IR).
This is all about disruptive technologies; technologies that change the way we live and the way we work. That includes things like:
- Artificial Intelligence (AI)
- The Internet of Things and great device connectivity (IoT)
- Social Media
- Healthcare & genomics
- Electric vehicles (EVS)
- Cloud computing
How widespread will the 4IR be?
Unlike other industrial revolutions which tended to be local (think the UK’s massive steam-powered mills and factories in the North of England), the Fourth Industrial Revolution is well and truly global. Today’s advancements in interconnected technologies mean communicating and working with partners around the world has never been easier.
4IR looks like it could be one of the best investment opportunities because it is likely to touch all areas of the economy. When you’re using your smartphone to shop online, facetime a friend or relative, or use any app, you’re already feeling its effects.
The Covid-19 pandemic has blended with FIR to push remote working platforms like Microsoft Teams and Slack to the forefront of people’s working days. Tesla is pioneering electric vehicles, not just in personal transport, but also in developing electric trucks for transport & logistics purposes.
AI, big data and increasingly powerful computing power has also seen a huge rise in data sciences and analytics in any number of fields, for good or for ill. Burnley FC might be using AI to help scout the next generation of football players for its academy, while others have used it to sway elections – who else remembers the Cambridge Analytica scandal?
Advances in robotics is making manufacturing faster, as well as changing up warehousing operations. Ocado, the UK online grocery retailer, has pumped substantial money into proprietary warehousing robotics technology for instance.
The World Economic Forum Founder and Executive Chairman Professor Klaus Schwab, a former engineer, believes this is only just the beginning.
In his book which gave FIR its name, Professor Schwab said: “Prior industrial revolutions liberated humankind from animal power and made mass production possible and brought digital capabilities to billions. This fourth industrial revolution is fundamentally different – characterised by a range of new technologies that are combining the physical, digital and biological worlds. It is impacting all disciplines, economies and industries, and ultimately may even challenge ideas about what it means to be human,”
We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.
The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as AI, robotics, the Internet of Things, autonomous vehicles, 3D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing.”
So, what does this mean for people exploring thematic investing? Are there any stocks to watch out for? How can you get involved in this worldwide event from an investors’ standpoint?
Finding the best investment opportunities in the Fourth Industrial Revolution
Thematic investing is summed up by Exchange Traded Funds (ETFs). These are funds that track markets and indices based around a theme, grouping together stocks based on that theme. Investing in such a fund gives you exposure to a number of stocks at one time, without relying too much on any individual stock.
In this space, there are many ETFs available. The ARK Innovation ETFs from stellar investor Cathie Wood’s ARK are a good case study here. There are five current ARK exchange traded funds:
- ARKQ – ARK Autonomous Technology & Robotics ETF
- ARKF – ARK Fintech Innovation ETF
- ARKK – ARK Innovation ETF
- ARKW – ARK Next Generation Internet ETF
- ARKG – ARK Genomic Revolution ETF
There are other, new funds that are offering investors the chance to invest in a cluster of 4IR stocks. The VanEck Social Sentiment ETF, which is listed as BUZZ on the New York Stock Exchange, lists many tech and social media companies pioneering Fourth Industrial Revolution industries.
What’s interesting is the BUZZ ETF also uses 4IR tech to select its constituents. An AI algorithm scours the internet to find stocks that are causing the most positive buzz on social networking and news websites. Those getting praise from investors are added – provided they have a minimum market cap of $5bn.
You may also wish to invest in a single company, rather than a stock. If you were looking at 4IR thematic investing, then you’d be looking at companies involved in the sectors mentioned earlier in this article. So, for EVs, you might want to consider Tesla, e-commerce you might pick Amazon, or big data you might invest in Palantir.
A diversified portfolio would be a good approach here. Diversification means your portfolio would not lean too heavily on a single stock. With the variety of sectors falling under the 4IR umbrella, there are still ways to invest thematically without overexposing yourself in one particular direction. A mixture of ETFs and stock picks may present the best investment opportunities for you, should you decide to pursue such a strategy.
Of course, any investment strategy, requires careful analysis and research. It also comes with inherent risk. The value of your investment can go up or down. You could come away with less money than you deposited. Always do your due diligence prior to committing any capital and monitor your open positions carefully.