What is Thematic Investing?

Those who wish to grow their wealth often take different approaches to put their money in the right place for the right growth. One of the emerging strategies is thematic investing. It is an approach where you put your money into big trends or ideas that are shaping the world. So, instead of focusing on individual companies, you invest in broader themes like renewable energy or technology. With this blog, let’s understand thematic investing in simple words, how it works, its benefits and risks, and how you can get started.

A Brief About Thematic Investing

So, what is thematic investing? It’s all about investing in ideas or themes that you believe would grow in the future. These themes can be related to things like the environment, technology, healthcare, or changes in society. Instead of choosing just one company or industry, you invest in a group of companies that are connected to a particular idea.

For example, if you believe in the future of electric cars, you can invest in companies involved in making those cars, their batteries, or even charging stations.

So, the thematic investing definition simply means investing in trends that you think would grow over time.

How Thematic Investing Works

Now, let’s talk about how thematic investing works. It is quite simple. What you do is pick a theme that you believe would grow in the future. Then, you choose stocks or funds that are related to that theme.

One way to start thematic investing is by investing in exchange-traded funds (ETFs) or mutual funds that focus on specific themes. These funds would then allow you to invest in a group of companies all working in the same space. However, you still need to do some research and make sure the theme you are investing in has the potential to succeed.

Popular Themes in Thematic Investing

Though the possibilities are endless, here are some common themes that you may consider to invest in using thematic investment strategies:

• Technology: Many investors are drawn to themes around artificial intelligence (AI), cloud computing, or cybersecurity, as these are fast-growing areas.
• Clean Energy: With climate change being a big issue, themes like solar power, wind energy, and electric vehicles are getting a lot of attention.
• Healthcare: Innovations in healthcare like biotechnology or genetic research are also popular themes.

Benefits of Thematic Investing

Here are a few benefits of thematic investing:

• Many people like thematic investing as it allows them to support trends they care about. And this way, they can invest in themes that match their beliefs or interests.
• Thematic investing focuses on future trends, which means it could lead to long-term growth.
• A theme often includes companies from different industries and hence, this can provide a form of diversification for your investments.

Risks of Thematic Investing

Just like any investment, there are also several risks associated with thematic investing. One of the biggest risks is that the theme may not grow as expected. Even if a trend looks promising, things can change, or it may take longer for the theme to show real growth.

It can also be hard to predict the right time to invest. If you invest too early, the trend may not take off right away. If you invest too late, you might miss out on a lot of the growth.

That’s why it is important for you to understand these risks before diving into thematic investing.

Also Read : Understanding Risk Tolerance in Finding the Right Investment Approach

How to Invest in Themes

If you wish to get started and learn more about how thematic investing works, there are a few ways to do it:

1. ETFs (Exchange-Traded Funds): These funds track specific themes and allow you to invest in a group of companies connected to the theme.
2. Mutual Funds: Like ETFs, mutual funds also let you invest in a group of companies related to a theme, however, they are actively managed by professionals.
3. Stock Picking: If you are experienced and wish to have more control, you can choose to invest in individual stocks of companies that align with a theme.

Conclusion

So, if you believe in any theme, go for thematic investing and get the opportunity to grow your money. However, if you wish to have huge returns over a short period, then you can also consider P2P lending with 13Karat. Download the 13Karat app and invest in our 6-month and 3-months investment plans to earn returns of up to 13% per annum.