Thematic investing is an investment strategy based on global trends, or themes, believed to be shaping the future.
Thematic investments are aligned to structural socioeconomic shifts, like Climate change and Demographic & social change. Thematic investors seek exposure to the themes, technologies and industries driving or combatting those structural shifts, like Artificial intelligence, Biotechnology, and Electric vehicles.
Thematic investments are typically made via two main vehicles:
Individual stocks: Investors may wish to make a concentrated bet on an individual company aligned with a particular theme. For example, investors might back Nvidia to gain exposure to the Semiconductors theme.
Thematic ETFs: A thematic exchange-traded-fund (ETF) is a diversified investment aligned with a specific theme. The fund holds multiple stocks relevant to that theme, managed passively (by tracking an index) or actively, by a professional asset manager. Investors can buy or sell ETFs just like they would a stock.
Reasons people invest thematically include:
Invest in the future: Investors are likely to align their portfolios with macro trends and structural shifts they believe could lead to future growth. For example, they may think that investing in cybersecurity companies or stocks could yield long-term outperformance.
Contribute to innovation: Future trends often bring unique solutions for some of the world’s problems. For example, health technology and bio-engineering advances have brought to life the integration of robotics to human biology with the creation of bionic limbs for amputees.
Supporting what you believe in: If an investor backs ethical and green investing, and cares about the impact of business on the planet and society, they might use a thematic investment approach to incorporate ESG exposure within their portfolio. ESG stands for Environmental, Social, and Governance. It refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. ESG criteria help investors identify companies with sustainable and ethical practices, which may be more financially viable in the long term
Disclosures
This content is for informational purposes only. OPTO Markets LLC does not recommend any specific securities or investment strategies. Investing involves risk & investments may lose value, including the loss of principal. Past performance does not guarantee future results. Investors should consider their investment objectives and risks carefully before investing.
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