Spotlight on Thematic Investing: Aligning Portfolios with Ideas

Imagine you were out shopping for a wedding. Rather than buying unrelated items randomly, you look for a theme—perhaps a royal wedding, a minimalist garden wedding, or a beach wedding.

- Nitin Patel, Finfreedom33

Your theme will dictate what you wear, how you decorate, and what you serve, so everything is beautifully coordinated. Thematic investing works much the same. It involves aligning your investments with some broad notion or potential, creating a thematic portfolio that capitalises on the possibilities in an emerging trend or long-term shift.

What is thematic investing?

Thematic investing is about identifying a broad theme that ties together different industries or companies. For example, a digital India theme could include technology service providers, fintech players, digital infrastructure players, and mobile payments. Investors, by investing in this set of interrelated industries, are trying to capture the advantage of the broader theme without investing in individual stock or industry.

Challenges to ponder upon