ETF industry has undergone a huge transformation in the recent years. The size of the same in terms of investment has grown in size to be really huge. With such a tremendous growth as this, the pressure to reach new heights has increased. The industry is aiming at much higher levels. People are altering their habits from investing traditional market capitalisation indices to the alternatives like Smart Beta. With more and more investment opportunities, people are become more smart with the passage of time. They are heading towards Thematic Investing. Here in this article we will give you an insight into the Thematic Investing and the strengths as well as the risks associated with it. Here is the must know about Thematic Investing.
Thematic investing is just an approach of making benefits by taking the advantage of the future trends. Currently this is the most diversified form of investment. These give you an opportunity to generate the alpha. The forward-looking approach of Thematic Investing is primarily based on the market capitalization. Not only does it aim at availing and generating the superior returns, but it also aims at evolving the traditional index investing.
Strengths of thematic investing
In order to benefit from the same you need to have the potential to identify as well as capitalize on the themes. However, you need to keep this in mind that not all the themes will result to be the successful investments. To be successful in thematic investing, you need to be smart at selecting the portfolio. You need to select the particular trends or the themes that sits with the exact values they have. You need to determine the structural trend. In addition to this you need to be very speculative about the same and should not fall a prey to the false signal of the market.
Thematic Investing might appear tempting at the forefront to actively participate in the same. Though in most of the cases you might come out successful but there are several occasion where the companies end up facing losses. There are times when such an investment might get susceptible to addressing the macroeconomic turmoil in addition to the slowdowns as well as the recession. By arriving at the defensive position, the investors are trading simply based on speculation instead of going in for the investment in the structural trends.
All in all, though thematic investing provides a very good alternative to the traditional indices, yet to benefit from the same you need to have a thorough knowledge about the same. Things never settle the same way for all and sundry. It is only the ones who are able to study the concept in brief, understand the same and then make use of it to fetch maximum out of it. Thematic investing gives you the maximum benefits when you contemplate the already established portfolio. Basically institutions make use of various approaches that include developing views that fall within the structure and then placing a thematic overlay.
The author is a person of vision and speculation who has an in depth knowledge about Thematic Investing in the investment market. The author tends to give all and sundry an insight into the same in order to make more and more people aware about the Smart Beta to enhance efficiency and growth.