What is thematic investing?
Thematic investing is an approach that focuses on investing efforts on predicted long-term trends rather than specific companies or sectors, enabling investors to access structural, one-off shifts that can change an entire industry.
There are essentially two kinds of investment: long-term and short-term investments. Some are designed to yield returns over a short period, while others are meant to grow slowly over the course of many years. So, where does thematic investment strategy fit on the scale of short- and long-term investments?
Long-term trends mean long-term investments
Thematic investing, by its nature, is undoubtedly a long-term approach to investment. It works by studying and projecting long-term developments in specific economic areas and therefore is better suited to investors who are prepared to take a long, careful and studied view of their financial growth instead of the speculator looking for fast returns. Moreover, this approach matches the longer-term horizons of institutions and private equity investors.
To get involved in thematic investing, one first has to take the time to observe developments in world events, from changes in technology to politics, the financial markets and the relative dominance of different sectors and companies. To make a good target for thematic investing, these trends must show the potential to develop over a long period of time and have far-reaching impacts. Then, an investor must slowly build a portfolio after identifying companies and assets most suited to the relevant trends. Only then, after creating a thematic index, can the investor begin to move forward. Then it is a matter of watching, tracking and waiting patiently, allowing the initial investment to ride the wave of the trend. This is clearly a long game – it takes a long time to prepare and takes a long time to see returns. Therefore, thematic investing is only for individuals prepared to be patient and let their investments bear fruit slowly.
Nour Private Wealth (NPW) is a team of expert wealth advisors focused on devising thematic investment strategies to protect and grow generational wealth. Contact us for more information about long-term and short-term investments and how each can benefit you.