Thematic investing is a popular strategy for selecting investment targets likely to yield above-market returns in the long run. Many investors hold back from choosing the strategy as they are uncertain of the concepts and terminology it involves. Here is a guide to some of the most frequently-asked questions about thematic investing.
What are Thematic Stocks?
Stocks and equities are the same in thematic investing as in any other investment methodology. What differs is the way in which stocks are selected. With sector-based investment, an investor may select stocks and equities in companies working in particular industries. With thematic investing, the object is to find companies that are connected with the chosen theme and then select them for investment on the basis of their level of exposure to that theme and their projected future gains.
Are Thematic ETFs a Good Investment?
Provided you choose carefully, you are sure to find an ETF that gives you the desired market exposure and helps your wealth grow. They do often have higher expense ratios than some other funds, but they are largely in line with the average expense ratio and can provide very satisfying returns.
Are ETFs Safer Than Stocks?
ETFs have risks, just as stocks do. Some ETFs may yield better returns and are seen as safer investments, but the safety and the potential returns depend on the sectors and industries in question. Both stocks and ETFs are classified as low-risk, medium-risk and high-risk based on the assets and sectors involved.
Who Should Invest in Thematic Funds?
Thematic funds are generally not intended for investors who are generalists. They will best serve people who have a good understanding of the specific themes targeted by the funds.
Which Thematic Fund is Best?
There is no one right answer to this question. The best thematic fund for you as an investor will depend on your interests, the theme you select and your risk appetite. A wealth manager will help you select the best thematic fund for your purposes.
Nour Private Wealth (NPW) is a Canadian company with a team of wealth advisors servicing clients across seven provinces. For more information on thematic investment, thematic ETFs and other forms of wealth creation and preservation, contact us today and speak to one of our wealth advisors.