Thematic investing

Once you’ve built a thematic portfolio, it’s crucial to regularly evaluate its performance. Let’s jump into how you can navigate through this exciting roller coaster ride. 🎢

Monitoring your thematic investments 🔍

After setting sail on your thematic investing journey, the first thing you need to do is keep an eye on the performance of your investments. This isn’t just about looking at the numbers – although that’s important too – but understanding what’s driving those numbers.

Say you’ve invested in an ETF that tracks the clean energy sector, like the iShares Global Clean Energy UCITS ETF. You’ll want to regularly check how this ETF is performing, but you’ll also want to follow the broader clean energy sector. 💡

Look at how clean energy companies are performing and keep track of the latest clean energy technologies. News articles, earnings reports, and industry analyses can be great sources of information.

And don’t forget to keep an eye on the broader market and economy too. Sometimes, macroeconomic factors like interest rates or geopolitical events can impact your thematic investments.

Adjusting or exiting a theme ⏰

One of the tricky things about thematic investing is knowing when to adjust or even exit a theme. Themes can take time to unfold, and it can be hard to tell whether a dip in performance is a temporary setback or a sign that the theme isn’t panning out as expected.

Consider the electric vehicle (EV) trend. If there’s a setback – say a critical battery technology fails – EV stocks might take a hit. But does this mean the EV theme is no longer viable? Not necessarily. It could just be a bump in the road. 🚘⚡

That said, there could be times when you need to adjust or exit a theme. Maybe the theme has run its course, or perhaps it hasn’t unfolded as expected. This is where regular monitoring and analysis come in handy.

The life cycle of a theme 🌱

Like everything in life, investment themes go through a life cycle. They’re born, they grow, and eventually, they mature. Understanding this can help you manage your thematic portfolio.

Let’s take a trip down memory lane and look at the internet boom. In the late 1990s, the internet was a budding theme. As it gained momentum, dot-com stocks soared. But when the dot-com bubble burst in 2000, many of these stocks crashed. Yet, out of that rubble emerged today’s internet giants like Amazon and Google. 💥

The lesson? Don’t just jump on a theme because it’s hot. Understand the life cycle of the theme and be prepared for volatility.

Evaluating the performance of your thematic portfolio is not just about watching numbers go up and down. It’s about understanding the story behind those numbers and being patient enough to let that story unfold.

Let’s wrap it up, shall we?

In this learning guide, you’ve learned:

🔹 Thematic investing focuses on broader, long-term trends that shape our society and economy, providing opportunities to invest in the transformative forces shaping the world.

🔹 It allows investors to buy into a story or vision of the future rather than just individual companies, providing a sense of purpose and impact beyond financial returns.

🔹 Thematic investing can offer potential high returns and flexibility, while aligning with personal beliefs, making it a compelling investment approach for those seeking both financial and values-driven outcomes.

🔹 However, it comes with risks such as market volatility, prediction errors, and concentration risk, requiring careful analysis and risk management to navigate successfully.

🔹 Building a thematic portfolio requires identifying and researching investment themes, selecting suitable investment instruments, diversification across themes and within each theme, and regular monitoring and evaluation to adapt and optimize the portfolio over time. 

Until next time, keep your investment spirits high, and never stop learning! 🎓

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As always, when investing your capital is at risk. This information does not constitute advice nor a recommendation. You should consider your own personal circumstances when making investment decisions.