Thematic Exposures In Shares (Gaming, Renewable Energy, Crypto, etc)
Investment in trends in Australia requires in-depth research into the behaviours of shares and stocks of companies and commodities over a period, and the needs of investors and intermediaries to maximize their investments.
Thematic exchange-traded funds (ETFs) concentrate their investments in a particular theme, trend, or sector. These include gaming, renewable energy, cryptocurrencies, and video gaming, among many other areas.
Thematic investing and thematic ETFs do not place significant emphasis on geographical or sectoral boundaries. They are usually designed to provide exposure to a wide range of industries that stand to gain from particular, structural, long-term trends.
Thematic Investment Strategy – All There Is To Know
Investors use thematic investing to identify long-term trends and the investments that will likely benefit from those trends.
In thematic investing, investors are looking ahead, taking advantage of changing economic factors, technological advancements, demographic trends, and consumer behavior they can see taking place around them.
An example of this is the rise of NFTs, Crypto trends and the burgeoning interest in cybersecurity, driven by governments, corporations, and individuals spending large sums of money to prevent cyber-attacks, data theft, and industrial espionage, and other hacks.
Advantages of Thematic Investing
Long term thematic investments offer potential fo significant growth.
Diversifying Portfolio Risk
Since the return on thematic investments has tended to be less correlated with swings in major regional or sector benchmarks, investors can spread portfolio risk.
Thematic investing ignores geographical boundaries, sector classifications and style biases, meaning that investors are unconstrained in looking for investment opportunities, and can take a far more flexible approach in thinking about how industries and companies work in a global universe.
Less Driven By Timing
Investing in long-term themes is less driven by the timing of entry and exit points compared to investing based on economic cycles. The theme has the potential to prove profitable whether the ‘wave’ is caught early or a little later.
Suits Passive Investment Approach
ETF thematic investing lends itself to a globally diversified passive investment approach – identifying companies that have revenue exposure to a secular trend, then investing in leading companies in the sector from around the world.
How To Choose A Thematic ETF For Investment
? Lookout For a Winning Theme
Winning themes should include a logical narrative, compelling data, and a coherent, compelling growth story. In addition, the strategy should be flexible enough to be adapted as the specifics of the chosen topic evolve over time.
? Choose A Theme That Fits Your Investment Horizon
Although thematic investments are less driven by time than traditional investments, investors still need to consider the timeframe in which the theme is expected to play out. Set exit criteria based on robust metrics such as valuation ratios in order to protect yourself from poor investment decisions.
? Choose A Fund That Can Harness The Theme
Investors should look closely at how well a fund tracks its theme. The reason for this is that there are often few pure-plays within any given industry. Moreover, even when there are pure-play companies, they are not guaranteed to be positioned to benefit directly from specific themes. Even if they were, their growth would have already been priced into their shares.
Risk is inherent in all investment methods, and thematic investing is no exception. In view of the long-term nature of mega-trends, the trend is more likely to take longer than expected to develop – or even fail to materialize.