What is thematic investing?

What is thematic investing, how does it work and what are the benefits? In this article we will take a closer look at the topic.
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When you search “What to invest in” on Google you get over 1.5 billion results. This doesn’t come as a surprise since choosing investments is one of the biggest hurdles when building an investment portfolio. An investment portfolio is the collection of all your financial investments such as stocks, bonds, and exchange-traded funds (ETFs). A portfolio can also extend beyond the stock market with investments in real estate, gold, paintings or other art collectibles but in this article we will focus on ETF investments. Like stocks, ETFs can be traded on exchanges and have a price. Unlike stocks, which represent just one company, ETFs represent a bunch of companies and provide better diversification than a single stock. 

“Diversifying your portfolio is the act of investing in a variety of different industries, areas, and financial instruments to reduce the risk that all the investments will drop in price at the same time.”

 It basically means not to put all your eggs in one basket. To build a diversified portfolio, it is important to understand the difference between ETFs. Let’s have a look at a few different kinds of ETFs. ETFs on popular indices are designed to mirror the performance of widely followed stock market benchmarks such as the S&P 500. The S&P 500 is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. An emerging market ETF is an exchange-traded fund that invests in the stocks of emerging market economies. 

Thematic ETFs are funds that offer the opportunity to invest based on a particular theme and can be narrow or relatively broad in scope. Thematic investing is also an opportunity for investors to harness the power of megatrends. Megatrends are waves of change that transform the world permanently and on several levels – technically, economically, socially. One example of a megatrend was the rise of the internet in the 90s. Identifying megatrends and investing in expected transformation may be a key driver of successful investing. This is particularly important for long-term investors seeking to include growth opportunities in their portfolios.

Themes examples

What are the benefits of thematic ETFs?

According to fund managers in a 2020 survey, the most important attributes of ETF products and strategies are low investment costs, ease of trading, diversification and risk management.

barchard of benefits of ETFs

According to Fidelity, many people are looking for a way to easily align their investing strategy with their personal values and interests. One way to do that is by doing extensive research and putting together a diversified portfolio by manually picking stocks that reflect those values. The alternative and easier way is to take thematic ETFs as a starting point. Deciding what to invest in can be a daunting task. By investing in thematic ETFs you don’t have to go through the process of individual stock picking. Instead, you can explore potential investments you're interested in, aligned to your views and beliefs. You can invest in the theme “Future mobility” because you think it will be an investment trend or because you want to support the industry for sustainability reasons. However, we still encourage you to understand the risks and pitfalls that come with any investing approach. That's why we partnered with industry experts to produce educational content that helps you navigate the thematic investing world. Sign up to the waitlist for early access. 

How to invest in themes?

Investing is not only about numbers and returns. With our thematic ETFs you can easily build a personalised portfolio that reflects who you are and what you stand for. heyfina unlocks an experience of content and education, a personalized portfolio and community of experts and beginners. We have condensed hours worth of expert knowledge into an easy-to-follow and quick format. One of the first modules will guide you through all the fundamentals investing for beginners so you can start investing with confidence. Join the heyfina waitlist to get early access to the app and our themed ETFs.

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