Why the game driving every mother crazy could make you rich

Electric cars, AI and even Fortnite can revolutionise your portfolio...

NEW technological developments are exciting because they have the power to revolutionise the way people live and work. But can t he companies behind the advances transform your investment portfolio too?

Businesses built on untested ideas can be notoriously volatile – and even when you think you are on to a winner, the steam can run out. Remember Blackberry’s rise and fall – and the great technology shares crash at the turn of the millennium.

The key is to get in early. Many investors wish they had bought the ‘Fangs’ – Facebook, Amazon, Netflix and Google – years ago. For example, the share price of Alphabet (owner of Google) has shone, rising more than 16-fold in five years.

But if choosing technology shares, you must be prepared for a rocky ride. Among the top technologies to keep an eye on are artificial intelligence and robots, electric cars, the internet of things, virtual reality and businesses battling climate change.

When aiming to build wealth, investors should not just consider the big names in a sector. The companies involved all the way down the supply chain will also profit from any boom. Laura Suter, personal finance analyst at investment platform AJ Bell, says: ‘Behind the electric vehicle revolution are not just the big brand car makers, but also the raw material suppliers of ingredients for lithium battery technology and the component manufacturers.’

But the lower down the chain you go, the more start-ups and fledgling operations you’ll find. These are difficult for ordinary investors to back directly and can be risky.

Laith Khalaf, of broker Hargreaves Lansdown, says: ‘ These businesses can be subject to competition or technology becoming obsolete. Sometimes their share prices can be eye-wateringly high, because the market has already pencilled in future growth.’

Access to transformational technology opportunities can also be found through investment funds, investment trusts and venture capital trusts. Suter says: ‘It makes sense for those with small investment pots to use collective funds to access many of these sectors, so the risk is spread across a number of companies.’

SMART MONEY IS ON ARTIFICIAL INTELLIGENCE

SCIENTISTS have been developing systems that mimic human intelligence for decades with varying success. Recently, there have been breakthroughs now being enjoyed by ordinary consumers – such as the voice recognition used with Amazon’s virtual assistant Alexa. Robot technology is also transforming the repetitive tasks previously carried out by human workers.

WHERE TO INVEST:

INVESTORS brave enough to pick individual stocks could consider robotics firm Blue Prism, which focuses on automating processes within companies, helping boost productivity and improve customer service. Suter says: ‘Its shares have enjoyed a stratospheric rise, turn- ing £100 into £1,700 since it listed on the Alternative Investment Market in 2016.’

Worries over losses announced last summer sent shares into a spin and they are now half their peak price – a potential buy for the bold.

For broader exposure consider i nvestment fund Polar Capital Global Technology. The managers behind this fund are excited about arti f i ci al i ntell i gence and t he promise of self-driving vehicles.

They have big investments in software, digital marketing, semi-conductor and components sectors, through companies such as Adobe Systems, PayPal and ServiceNow. The fund holds around 60 companies and has turned £100 into £229 over the past three years.

For a more focused fund, consider Candriam Robotics and Innovative Technology. Dzmitry Lipski, investment expert at broker Interactive Investor, says: ‘ This fund gives access to robotics, automation, artificial intelligence and smart factories but is not for the faint-hearted with no more than 50 stocks.’

Another option is Smith & Williamson Artificial Intelligence. This fund looks for companies that not only develop artificial intelligence software but businesses using it to transform their enterprise. The fund managers even use such software to help in their stock selection process.

Laith Khalaf, of broker Hargreaves Lansdown, says investors could also consider a passive fund such as Legal & General Robotics and Automation Exchange Traded Fund. This tracks an index of listed companies specialising in this area. He adds: ‘For a single company, you could consider Ocado. The company’s ace up its sleeve, which it can license out to global partners, is its vast robotic warehouses which make picking orders more efficient.’

Wealthier investors could consider a venture capital trust such as Octopus Titan – in return for which they get tax perks. These trusts are high risk and use investors’ cash to help early stage British businesses grow.

Among Octopus Titan’s investments is GTN, a biotechnology firm that uses artificial intelligence to help create computer models capable of speeding up the discovery of new drugs.

CONNECT WITH THE INTERNET OF THINGS

ALREADY changing the way that humans live are devices that connect and talk to each other. In future we could be chauffeured by driverless cars and booking a holiday or turning on the home heating via the car dashboard.

The financial winners will be businesses that can meet demand for the gizmos and software necessary to make this connected world run smoothly.

WHERE TO INVEST:

CONSIDER Brunner Investment Trust. The managers invest in companies such as German technology group United Internet and American giants Apple and Microsoft.

Suter says: ‘The trust has increased its dividend every year for 46 years.’ An alternative is fund AXA Framlington Global Technology. A feature of technology investing is that innovative ideas often come from small enterprises that are then acquired by larger companies.

Ed Monk, investment expert at Fidelity International, says: ‘Examples include Amazon, and Alphabet, parent of Google. Amazon has led the way in the internet of things with the Echo, of “Alexa” fame. Google has also been developing innovations under its “other bets” banner.’

Vodafone is another option, says Helal Miah, investment research analyst at The Share Centre. He says: ‘Its management is focused on digitising the business and supporting the growing demand for data that will come from the inter- net of things.’ He also suggests Dixons, with smart devices beginning to contribute strongly to the retailer’s sales.

GENERATE CASH FROM CLIMATE CHANGE

RENEWABLE energy is predicted to be the fastest-growing energy source over the next couple of decades – helped by the falling cost of wind and solar power.

WHERE TO INVEST:

THERE are numerous investment trusts investing in environmentally focused companies. For example, Impax Environmental Markets invests in clean energy companies worldwide. Among its current holdings is US company Ormat Technologi e s which o perat e s renewable energy plants.

The fund also has exposure to firms involved in the recycling of waste, water treatment and pollution control. Lipski also suggests Jupiter Green, a fund that selects global companies trying to solve environmental problems.

For a single share consider company waste firm Biffa. Suter says: ‘It is one of the UK’s largest producers of energy from waste – diverting waste from landfill to be converted into energy. The firm is also investing in a new plastics recycling facility.’

Another listed company with potential is energy firm SSE. The Share Centre’s Miah says: ‘As one of the key generators of electricity in the UK it has taken a lead in renewables and invests in onshore and off- shore wind energy, conventional hydroelectric, biomass and pumped storage hydroelectric energy.’

ADD A DIMENSION WITH VIRTUAL REALITY

HEADSETS using software that brings different worlds to life in 3D have captured the imagination of developers in sectors from architecture and marketing to the training of surgeons and pilots. So far it has gained most traction in the gaming market allowing players to immerse themselves more fully in games.

WHERE TO INVEST:

DARIUS McDermott, of broker Chelsea Financial Services, says it is hard to find a fund that focuses purely on virtual reality. He says: ‘The market leading company is Oculus Rift, owned by Facebook.’

Funds with big holdings in games firms include Artemis US Extended Alpha and Rathbone Global Opportunities.

Fidelity’s Monk likes Polar Capital Technology Trust. Key portfolio themes are games software and virtual reality. He says: ‘One runaway success has been Fortnite, the online game where players compete in “Battle Royale” scenarios. Developed by US firm Epic Games, it is now 40 per cent owned by Tencent, the Chinese tech giant, which is the fourth largest holding in the Polar trust.’

ACCELERATE RETURNS WITH ELECTRIC CARS

DEMAND for electric cars is forecast to leap amid greater efforts to phase out the toxic combustion engine to help reduce pollution.

HOW TO INVEST:

TESLA Motors is the poster boy of the electric car sector with its highperformance vehicles now being developed for the mass market.

But Khalaf warns: ‘A great product and brand doesn’t necessarily make it a sensible investment.

‘ The market is expecting big things from Tesla and that is reflected in a share price that values it 1.5 times more than Ford which makes 6.6 million cars a year compared to Tesla’ s 350,000. Another issue is that it has a maverick boss in Elon Musk.’

Investment opportunities can be found beyond the car brands. Miah suggests chemicals company Johnson Matt hey with its focus on developing materials for modern batteries. He says: ‘This is a longestablished company that is profitable and has consistently paid steady dividends.’

An alternative is mining giant Glencore which controls a large chunk of the cobalt market, a vital element of the lithium batteries used in electric cars. Since most cobalt is mined in the Democratic Republic of Congo, this investment comes with geopolitical risks.

For a broader exposure, consider investment trust Scottish Mortgage, which has a strong technology focus and has half its 80 holdings in unlisted investments.

Natural resources funds may also appeal. One of the best known is BlackRock Natural Resources Growth & Income which has Glencore in its portfolio.