I’m looking at these investment themes to build wealth in 2021

5G and ESG are two investment themes that I think will perform strongly in 2021: Here is how I am looking to play them.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Recently, I wrote about three big investment themes that I am looking to invest in for 2021. In this article, I’ll talk about another two that I am looking at for the coming year and beyond. 

Environmental, social, and corporate governance

2020 was a big year for the ESG or sustainable investing theme. Huge amounts of money flowed into stocks and funds that scored well across the three central factors for measuring the sustainability and societal impact of investing. The pandemic’s imminent threat seems to have sharpened focus on longer-term issues like climate change. Questions surrounding the fair treatment of workers, both before and after hiring are growing louder.

There are now requirements for fund managers to disclose how they incorporate ESG factors into their investment decisions. Also, individual companies are starting to report more on how they perform across the environmental, social, and corporate governance axis. ESG investing does appear to be coming of age.

One way to play the ESG trend might be to exclude companies that don’t score well. As examples, think of oil & gas companies that are not transitioning to a renewable future, or perhaps fast fashion companies that score poorly for sustainability. Trying to buy companies that do well on ESG measures is the more obvious path. However, defining what falls under the umbrella of ESG and how to score companies is tricky. Instead, I prefer to buy sustainable funds, that have the resources and expertise to develop a robust framework for selecting ethical investments, to play this trend. As examples, Royal London Sustainable leaders and Liontrust Sustainable Future Growth are two funds that have performed strongly over the last 10 years.

5G investment theme

The fifth-generation (5G) technology standard for broadband cellular networks means faster mobile (wireless) data speeds and greater capacity. Buying into telecommunications stocks might seem like the natural way to play the 5G investment theme. I am not so sure.

The most bandwidth-taxing activities of your average mobile network Internet connection user are streaming music and video. 4G is enough for the average user for now. The average user will likely transition to 5G-capable devices when they need to upgrade their mobile phone, rather than because they want a 5G device. Yet Telecoms companies have, and will continue to bid for 5G bandwidth in auctions. They have to do this to stay with the rest of the pack.

But, for some users now and an increasing number in the future, 5G does enable mobile online gaming, connected devices, crystal clear video conferencing from anywhere and augmented reality. I prefer to play the 5G trend by focusing on companies serving customers who want 5G right now.

IQE makes compound semiconductor wafers that end up in integrated circuits. It sees market growth opportunities in 5G handset applications and 5G infrastructure. Concurrent Technologies makes embedded computer products for use in many applications. Communications with and between embedded devices is something that 5G is beneficial for. Smart cities and homes, or the Internet of Things will rely on embedded devices and speedy communication between them. Spirent Communications helps businesses develop and test their 5G networks and 5G capable devices, among other things. 

This is how I would look to play the 5G investment trend: looking for companies that benefit from incremental adoption of 5G technologies.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James J. McCombie owns shares in Spirent Communications. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »