‘Investing for your future by investing in the future'

January 2022

Wealth Insight

Thematic investing seeks to tap future trends and hence aids in wealth creation, says Swarup Mohanty of Mirae Asset Mutual Fund. We also speak to him about smart-beta ETFs, the newly launched Mirae Asset NYSE FANG+ ETF and how investors should approach ETF investing.

‘Investing for your future by investing in the future'

What role do thematic ETFs play in one’s portfolio?

Thematic investing is a forward-looking investment approach, which attempts to capture future trends. It seeks to embrace the changes we anticipate happening in the world. It is often touted as investing for your future by investing in the future. It plays the following role in one’s portfolio:

• Opportunity to take focused exposure in a secular theme like consumption or emerging themes like electric vehicles, e-commerce, etc.

• Thematic investing focuses on a selection of stocks to capitalise on a future growth trend. Selecting a few companies involved in internet of things, blockchain or renewable energy, for example, could yield huge results should those industries develop as expected.

• Thematic-investing strategies are also highly customisable and can vary significantly based on an investor’s preferences. While thematic funds are highly concentrated, investors can still achieve diversification by building portfolios based on more than one theme.

What are your views on smart-beta ETFs? Amid the active-vs-passive debate, do you think that the smart-beta strategy will gain investor interest?

Smart beta refers to an indexing strategy which seeks to use certain well-researched factors to select stocks and weigh stocks in order to create an index portfolio. The idea is to move away from a plain-vanilla index, where allocation of assets is simply based on market cap, and use some intelligent factors or scheme to select and allocate the money in supposedly a smarter manner.