What is Thematic Investing?
In this ever-dynamic world, the only constant is change. Disruptive ideas, innovation, economic forces and natural events keep reshaping the world we live in.
At smallcase, we believe that thematic investing is all about identifying these shifts and investing in companies strategically aligned to benefit most from such changes. Some example themes include –
- launch of Digital India campaign by the government
- cyclical upturn in sugar sector
- RBI’s decision to reduce interest rate
- clean tech solutions to counter increasing pollution
- depreciating currency and increasing exports
- rising consumerism boosting e-commerce industry and its enablers
- an idea or quantitative model to screen stocks on different parameters
Thematic investing is the most natural way of investing
We are always naturally associated with themes we observe, read, experience or believe in. In discussions, statements like these always come up- “I believe banking stocks would do well under the new government or medical tourism is becoming a huge sector in India”. Thematic investing is all about making them actionable. This helps you get the right exposure to a concept with an appropriate amount of risk. We say, appropriate, as you are investing in a theme with a portfolio of companies, so you are never exposed to company-specific risks, and are also able to invest in the trends and ideas you believe in.
Countless research studies note that past market returns are never a good indicator of future performance. The beauty of thematic investing is that it’s always forward looking.
“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” – Wayne Gretzky
Instead of betting on the broader market, a great investor is always forward looking and invests in scenarios she believes will materialize in future. It also doesn’t mean buying stocks all the time, it could be about shifting focus away from a sector or shorting companies with bad balance sheets.
A McKinsey article shows how leading institutions are adopting thematic investing over traditional methods
At smallcase, we intend to bring this approach to you. On the platform, you get ready-made investable themes.
- You can sort these based on sectors, trend types, quantitative models, popularity, returns, etc
- You can also customize constituents & weights, so they are perfectly aligned with your beliefs and goals
- If you don’t find a theme you like, you can create your own smallcase and invest in it in a convenient and cost-efficient manner
You may want to read
A Subscriber’s Guide to Windmill Capital smallcases
