What is the best sector to invest in currently?
As you can see on many company earning news, many companies are making huge money despite the current pandemic. Those companies are mostly technology-based companies. The following shows the top 13 largest companies in the world by market capitalization in 2020.
Top companies in the world (market capitalization in 2020)
You might notice that most of the biggest companies in the world are also technology-based companies, i.e. Apple, Amazon, Alphabet, Facebook, Alibaba, and Tencent Holdings. These are also the companies that contributed a lot of capital gain on investment, i.e. 62% over the past 1 year in the US market (see the table below).
1 year return for different sectors in US Source: https://stockcharts.com/ Based on the historical return and the data of the growth of the companies, technology sector is a sector that should not be missed by investors. During the pandemic season, the technology companies are the enabler for effective communication in the absence of physical interaction. It is hence hard to be eliminated even if the pandemic is finally over. The virtual habits have been formed, people are used to using computers and phones. Many may argue that the valuation of such technology companies is high. No doubt, for some of these companies, the valuation is over-valued. However, there are plenty of technology-based emerging companies of all sizes and start-ups as well to be considered for investments. To tap on the emerging technology companies, there is a recent available unit trust fund in Malaysia which focuses on innovative technology fund called “Global Disruptive Innovation Fund”. The fund is focusing on 5 elements of technology, i.e. artificial intelligence, energy storage, DNA sequencing, blockchain and robotics. This fund does not focus on typical technology companies [FAANG – Facebook, Amazon, Apple, Netflix and Google] which the valuation is high but it focuses on alternative smaller, medium and emerging companies for better growth and opportunities. Apart from technology, the fund manager focuses on research to look for technologically-enabled innovation including fintech innovation, internet innovation, genomics innovation and industrial innovation. It also focuses on capturing early stage disruptors rather than matured and established companies to enable better growth in long term investment. Something to note is that technology sector offers investors a lot of opportunities, but it is not without risks. Technology changes quickly and one-time leaders can fall behind quickly as well. Hence, when investing in this sector, proper diversification shall be done to mitigate risk. Take calculated risks while growing your wealth!
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