Thematic investing

Ready to build a portfolio that’s not just about the here and now, but also about the ‘what could be’?

Welcome to the world of thematic investing. Let’s dive into how you can construct a thematic investment portfolio step-by-step.

Step 1: Identify and research investment themes 🔍

Building a thematic portfolio starts with identifying potential themes. This involves a bit of forecasting and a lot of research. Remember, themes can come from anywhere - technological innovation, societal shifts, environmental changes, or even regulatory reforms. Think electric vehicles, clean energy, digital payments, and remote work.

How can you spot a theme? It starts by staying informed. Read widely, listen to podcasts, attend webinars, and keep your ear to the ground. Once you’ve identified a potential theme, research it. Understand what’s driving it and which industries or sectors could be impacted.

Take, for example, the rise of artificial intelligence (AI). It’s being driven by advances in technology and increasing amounts of data. Companies developing or using AI - think tech giants like Google and Microsoft, or even smaller innovative firms - could benefit from this trend. 🤖

Step 2: Selecting suitable investment instruments 🎯

Once you’ve identified a theme, the next step is to figure out how to invest in it. There are several ways you can do this:

Individual stocks: You can invest in individual companies that are poised to benefit from the theme. For example, if you’re convinced that electric vehicles are the future, you might pick a company like Tesla. Just remember, investing in individual stocks can be risky, so do your due diligence. 🚗

Exchange-Traded Funds (ETFs): ETFs are a basket of securities that you can buy or sell on an exchange, just like a stock. Thematic ETFs let you invest in a range of companies connected to a particular theme. For instance, the WisdomTree Artificial Intelligence UCITS ETF gives you exposure to companies involved in the robotics and AI theme. 🤖

Mutual funds: Similar to ETFs, mutual funds can offer exposure to a specific theme, but they’re typically actively managed and may have higher fees.

Remember, different investment instruments come with different levels of risk, so choose wisely.

Step 3: Diversification and risk management 🌈

When building a thematic portfolio, don’t forget the golden rule of investing: diversification. Even if you’re super excited about a theme, don’t put all your eggs in one basket. 🥚🧺

You can diversify within a theme by investing in different companies or sectors. For example, if you’re investing in the AI theme, you could invest in tech companies developing AI technologies, but also in industries where AI is being applied, like healthcare or automotive.

But also diversify across themes. Maybe invest in the electric vehicle trend, but also consider others like clean energy or digital payments.

And remember, thematic investing should form part of a diversified portfolio that includes other assets like bonds, traditional equities, or even real estate. It’s all about finding the right balance for your specific risk tolerance and financial goals. ⚖️

The final lap 🏁

Building a thematic portfolio is a journey, not a sprint. It takes time, research, and careful planning. But it’s also an exciting way to align your investments with the trends shaping our world. Coming up next… how to evaluate the performance of your thematic portfolio.

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Keep in mind that when you invest your capital is at risk.