Thematic investing has become increasingly popular in recent years, bolstered by a growing interest in market trends. Offering exposure to specific market segments, this strategy can provide some unique benefits for investors.
The COVID-19 pandemic has further increased the popularity of thematic investing. As the world has adapted to the challenges of social distancing and working from home, new economic opportunities have emerged. These opportunities have led to increased inflows for thematic investments. In fact, thematic ETFs hit $133 billion this year, up from $27 billion in 2019. Popular themes include cloud computing, infrastructure, and climate change.
Below, we break down some of the key benefits of thematic investing and how to incorporate this strategy into your portfolio.
Thematic Investing Provides Access to Specific Market Trends
One of the main upsides of thematic investing is the ability to access major market trends. Also known as megatrends, these market movements signify shifts happening across the investment landscape.
By allowing investors to zero in on these trends, thematic investments provide the opportunity to align investments with personal interests. For example, if you’re passionate about renewable energy, you can seek out environmentally-focused investments designed to help you tap into that theme. The same is true for other trends including artificial intelligence, biotechnology, and gaming.
Like sector investing, thematic investing has a niche focus that speaks directly to investor interests. Unlike sector investing, it presents the opportunity to capitalize on trends spanning multiple market segments rather than a particular sector.
Investment Vehicles Such as Thematic ETFs Can Help With Diversification
Exchange-traded funds are one of the most popular types of thematic investments. Offering exposure to a range of underlying assets, ETFs make thematic investing accessible to those looking to expand beyond specific companies or stocks.
The proliferation of ETFs in recent years has also opened up a variety of options for every type of thematic investor. Between 2015 and 2021, the number of thematic ETFs more than doubled and it currently encompasses 9% of all sector ETFs. Incorporating thematic ETFs into your investment strategy can make it easier to diversify your portfolio and choose funds that align with the themes you’re most interested in.
Thematic Investments May Also Serve as a Hedge Against Risk
Another benefit of thematic investing is that it can help investors manage risk. This is especially true with ETFs and mutual funds, both of which are designed to provide exposure to a broader range of assets. While some thematic ETFs can be more prone to risk due to the themes they target, the exposure ETFs offer can serve as a hedge against volatility when added to a well-balanced portfolio.
One of the key trends of 2021, thematic investing is gaining momentum with both new and seasoned investors. To help investors tap into these areas of the market, VanEck has developed a variety of purpose-built funds offering access to different themes.
Depending on your particular interests, ETFs such as the VanEck Vectors Biotech ETF or the VanEck Vectors Semiconductor ETF could be helpful additions to your portfolio, allowing you to tap into some of the top advancements in those spaces. With deep insights into the thematic landscape, VanEck also offers relevant market updates to help investors make informed decisions.
As thematic investing continues to grow in popularity, having the right opportunities at your fingertips can help you capitalize on market trends. By understanding the factors involved in thematic investments, you can determine which funds are right for you.
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
The principal risks of investing in VanEck Vectors ETFs include sector, market, economic, political, foreign currency, world event, index tracking, social media analytics, blockchain and non-diversification risks, as well as fluctuations in net asset value and the risks associated with investing in less developed capital markets. The Funds may loan their securities, which may subject them to additional credit and counterparty risk. ETFs that invest in high-yield securities are subject to subject to risks associated with investing in high-yield securities; which include a greater risk of loss of income and principal than funds holding higher-rated securities; concentration risk; credit risk; hedging risk; interest rate risk; and short sale risk. ETFs that invest in companies with small capitalizations are subject to elevated risks, which include, among others, greater volatility, lower trading volume and less liquidity than larger companies. Investing involves risk, including possible loss of principal. Please see the prospectus of each Fund for more complete information regarding each Fund's specific risks.
Please call 800.826.2333 or visit vaneck.com for a free prospectus and summary prospectus. An investor should consider the investment objective, risks, and charges and expenses of the investment company carefully before investing. The prospectus and summary prospectus contain this and other information about the investment company. Please read the prospectus and summary prospectus carefully before investing.