The advent of the coronavirus in 2020 bought with it a so-called “new normal”, which accelerated the trends for remote working communications across the globe.
This precipitated a significant boom for communication stocks, with the soaring price of zoom shares leading this charge. October 2020 saw the video conference specialist’s stock value peak at 817% year-on-year, for example, while Zoom also blazed a trail for similar brands to follow through the year.
But what are the pros and cons of investing in such stocks, and what are the best communication assets to back through 2022?
What are the Pros and Cons of Investing in Communications?
When appraising the advantages of investing in communications and comms stocks, one of the most apparent is the diversity of options within this niche.
For example, market-leading options such as Zoom serve as remote communication and video conferencing tools, which offer direct services to users and play an increasingly integral role in ensuring business functionality in the digital age.
Other types of communication firms play a less seminal role in the marketplace, such as equipment suppliers, mobile providers and even traditional telephone companies.
Make no mistakes; this broad selection of options offers a variety of choices to investors, both in terms of price and the way in which you invest your hard-earned cash.
Despite the diversity of communication investments and the substantial growth that many of these assets have experienced over the course of the last 18 months, there are some disadvantages to trading comms stocks.
Once such issue is caused by the rapid pace of technological change and increased competition in the marketplace, which makes stocks vulnerable to sudden decline and price fluctuations. This creates the type of volatility synonymous with forex trading, which may deter risk-averse investors from dipping their toes in this particular stretch of water.
How to Invest in the Communications Sector
Certainly, the volatile nature of communication stocks makes it much harder for investors to achieve safe earnings and reliable cash flows, which means that you’ll need to find an investment vehicle that matches your risk portfolio and profit expectations.
This doesn’t mean that there aren’t stable, dividend-paying firms located within the communications sector, which may offer value and secure stores of wealth as buy-and-hold investments.
When targeting potentially volatile entities such as Zoom and similar equities, however, you may be better served by buying into communications-focused exchange-traded funds (ETFs) and index funds.
Due to the diverse nature of communication stocks, such funds offer excellent balance and can help to minimize your exposure to risk, without preventing your from leveraging the appeal of this high-growth and high-yield sector.
This is probably the very best way of investing in the communications sector, especially if you’re looking to speculative on price movements and profit without assuming ownership of the underlying asset.