The Internet of Things is a concept that’s expanding rapidly, evolving into a whole range of devices like washers and thermometers that “talk” to one another over the Internet. But investors in Australia should be wary of emerging data regulations before they invest in Internet of Things stocks.
What is the Internet of Things?
The Internet of Things (IoT) refers to a network of physical devices capable of connecting to the Internet. Many of us use this network every day, from streaming music through wireless headphones to adjusting the thermostat of our homes with a mobile device. Wearable technology, automated vehicles and smart devices all belong to the Internet of Things.
Popular Internet of Things devices include:
Amazon Echo
August Smart Lock
AWS Snowcone
Fitbit
Google Home
Nest Smoke Alarm
Ring Doorbell
WeMo Insight Smart Plug
Internet of Things stocks are from companies that design or produce Internet-connected hardware and software. You can invest in the IoT by purchasing individual stocks or exchange-traded funds in Australia.
Why invest in Internet of Things stocks?
The Internet of Things is considered a growth industry with numerous consumer, commercial and industrial applications. Automation is the name of the game for many subsectors of the tech industry as consumer demand for autonomous tech rises.
The global market for Internet-connected end-user solutions hit $US100 billion in market revenue in 2017, according to Statista. And it’s forecast that by 2025, the industry will be worth $US1.6 trillion. B2B market research suggests a compound annual growth rate of 26.9% for the IoT sector from 2017 to 2022.
Smart technology is growing rapidly, and IoT stocks give investors in Australia the chance to back a fast-paced sector with promising growth projections.
Risks of investing in Internet of Things stocks
Economic downturns can impact the viability of businesses that produce or sell consumer goods. After all, if consumer spending declines, so do profits. A large chunk of the IoT industry comprises electronics that are new enough for consumers to consider luxurious novelties — not necessities. This sector’s growth could be affected by even a mild recession.
Another major concern for investors is data privacy and security. This technology is evolving, and emerging data-protection legislation may damper the industry’s progress. As we continue to explore the role of this technology in our everyday lives, tightening data regulations and more robust privacy protections may force tech companies to rethink how Internet-connected devices access consumer data. Tech companies are far from immune to government jurisdiction. Emerging regulations could force companies back to the drawing board to amend their software, delaying product launches and affecting existing product lines.
Internet of Things stocks
To purchase Internet of Things stocks, prepare to invest in semiconductors, sensors, processors, chips, Bluetooth technology and smart devices.
For those seeking a less targeted and more diverse approach to investing in the Internet of Things, ETFs may be worth considering.
There is only one ETF that specifically tracks IoT stocks: the Global X Internet of Things Thematic ETF (SNSR). This fund has more than $US231 million in total assets and tracks many big names in the IoT sector, including Garmin, Qualcomm and Vivint Smart Home.
Compare trading platforms
To invest in IoT stocks, you’ll need a brokerage account. Compare features and fees of top accounts to find the best fit for your goals and budget.
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Bottom line
Internet-connected technology is growing at an impressive rate, with global market projections on track to crack $US1 trillion by 2024. But the industry relies on consumer spending, and the technology isn’t yet a necessity for consumers — yet.
Explore your brokerage account options with multiple providers to find an account best suited to your investing needs.
Frequently asked questions
Yes. Some that do include Analog Devices, Apple, Cisco Systems and Garmin.
Yes. No sector, industry or stock is immune to volatility, and Internet of Things stocks are no exception. Before you invest, make sure the stock fits your portfolio and investment strategy by reviewing company history and market performance.
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.
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