Thematic investing is an investment approach that focuses on long-term trends or themes that are expected to shape the future of the economy and society. These themes can be related to technology, demographics, the environment, or other factors.
By investing in companies that are well-positioned to benefit from these trends, thematic investors can seek to generate above-average returns.
There are many different thematic investing strategies, but they all share the same basic goal: to identify and invest in companies that are likely to be winners in the future.
Some popular thematic investing strategies include:
- Technology investing: This strategy focuses on companies that are developing or using new technologies, such as artificial intelligence, robotics, or renewable energy.
- Healthcare investing: This strategy focuses on companies that are developing or providing new healthcare products or services, such as gene therapy or personalized medicine.
- Sustainable investing: This strategy focuses on companies that are committed to environmental, social, and governance (ESG) principles.
- Emerging markets investing: This strategy focuses on companies in developing countries, which are often growing at a faster rate than developed countries.
Thematic investing can be a good way to diversify your portfolio and reduce your risk. By investing in a variety of companies that are all benefiting from the same trend, you can reduce your exposure to any one company or sector.
Additionally, thematic investing can be a way to express your personal values in your investments. If you are passionate about environmental protection, for example, you could invest in a sustainable investing fund.
Of course, no investment strategy is without risk. Thematic investing can be more volatile than traditional investing strategies, as the performance of your investments will depend on the success of the underlying trend.
Additionally, thematic investing can be more complex than traditional investing, as you will need to do your research to identify the right companies to invest in.
Some examples of ETFs that use thematic investing include the Global X Robotics & Artificial Intelligence ETF (BOTZ), the iShares Global Clean Energy ETF (ICLN), and the Invesco Solar ETF (TAN).
Some examples of companies that use thematic investing include Tesla (TSLA), which focuses on electric vehicles and renewable energy, and Amazon (AMZN), which focuses on online shopping and cloud computing.