string(7) "interna" Fintech | 8 November, 2018

Is technology a profitable investment?

Raúl Rendon Portfolio Manager

The digital population growth is a condition that will define the world, not only in business, but in politics and investment. The changes in the generations and the access that each of these had to technology defines the financial scenario and the form that the growth dynamics will take on a global level.

If we put this in context, in 2016 the digital population was concentrated among 15 and 29 years old, while according to some studies, in 2050 the digital population will cover the population ranging from 15 to 64 years old. In other words, today’s children will be the leaders within 32 years and their life background will be around a digital world.

Did you know that…?

  • In the United States, it took more than 45 years, so that ¼ of the population had access to electricity, approximately 34 years for landline telephony or 31 years for radio.
  • However, in the United States, it only took 7 years so that 25% of the population had access to the Internet and only 3 years to Facebook.
  • Some studies suggest that by 2023 a conventional laptop will have the ability to communicate at the human brain speed, while within 25 years they will be able to do so at the entire human species speed.
  • The Internet is an integral part of the millennials (24-36 years) life with an approximate penetration of 100% in the developed economies and of 50%-90% in the developing economies.
  • On average, a centennial (0-23 years) from the United States has a smartphone at 10,3 years old.

Technology: A disruptive industry

Technology innovation has changed how the world works and is extremely disruptive in changing how industries interact. In particular, some studies estimate that industrial robots will increase from 1 million in 2010 to approximately 3 million by 2020, worldwide. On the other hand, in the United States during this century, the work in the manufacturing industry has fallen from 17 million to 13 million.

It is clear that technology is changing and will continue to change the global economic dynamics. The consequences are substantial and we should expect that most industries will change diametrically in the future and we cannot rule out that some of them will even disappear or are reduced to minimum levels. In fact, this position is not visionary, since history gives us examples of disruptive changes; for example, in 1870, in the United States, 50% of the population was dedicated to the agricultural industry, while currently only 2% work in this industry.

Technology industry in my investment portfolio?

Of course. Having exposure to technology is taking part in the future of the economy and therefore, should be a core part of a profitable investment portfolio. Based on this, the next question should be: in what segment or niche idea should I position? Maybe it could be Software, Semiconductors, Robotics, Internet, Cybersecurity, e-commerce…?

The concept is wide and each idea must be associated with the investor’s profile, its investment horizon and the willingness to withstand volatile assets (e.g., software is less volatile than semiconductors), among other issues. That is why we recommend to check with your investment advisor the idea that best suits your needs.

The creation of a portfolio is not a single decision, but a continuous process in which ideas are re-analysed, changes in the portfolio weight are made, positions added or cut, etc. If we add market volatility to this, as we have seen over the year, the continued contact with your advisor is essential.