investing strategy

Getri
August 3
Basics of Investing

Thematic investing is an approach when a person is concentrating on investing in predicted long-term trends rather than specific companies or sectors. For example, instead of investing in different companies, that shows a promising future, a person concentrates on climate change topics and companies that fall into that category. Why might people want to choose this investing approach? This kind of investment approach helps people to take advantage of changes across entire industries, not just separate companies and opportunities created by technological, geopolitical and macroeconomics trends.

Definition

Thematic investing is a method where people try to identify significant opportunities and trends and invest in them, rather than investing in individual stocks or sectors. Thematic investing has a variety of themes, that focuses on different trends, such as digital economy, smart cities, food revolutions, climate change, autonomous technology and etc. Over the years, interest in thematic investing has been growing, as it helps to position investors’ portfolios for a long-term growth opportunity and capture growth from many different geographical areas and sectors, but concentrating on one major theme, that might be a mega-trend and bring important gains in the future. Also, it sometimes helps people to invest in what they actually believe in and care about.

Sector investing vs. Thematic investing

At first thematic and sector investing might sound similar and many people mix them up. The key differences between these two are, that sector investing distributes the investment funds into specific segments, like energy, healthcare, information technology and others. Thematic investing touches much more sectors to align with market opportunities.

How thematic investing works?

Although with the thematic investing the effort required to select companies people want to invest in is reduced, people still need to research the theme they are interested in, what are the opportunities of that theme, in which direction is it going, what the future might hold for it and what are the risks of investing in that theme. When people selected a theme, usually there are two ways to invest in it – either manually chose the companies and build a portfolio, or choose thematic investment ETFs (or do both).

Usually when creating a thematic portfolio strategy, people look at few factors:

Long-term trends
Ideas
Beliefs
Values
Disruption

Often, thematic investing focuses on mega-trends, disruptions in major industries, and sustainable investing. Often people choose to invest in themes that align with their beliefs and values. A good example of value-based thematic portfolio would be investing in woman-run companies or, for example, companies that take care of environmental sustainability.

There are several different themes for investing, probably the most common ones being:

Environmental – people can choose to invest in companies that work on climate and environmental issues and help to reduce the effects of global warming and similar issues. These companies usually work in sectors such as energy and manufacturing. A few examples of such ETFs – are BlackRock Sustainable advantage, Parnassus Core Equity investor, Shelton Green Alpha Fund and others.
Blockchain technology – these themes work on providing new innovations regarding cryptocurrency, NFTs and blockchain technology. A Few examples include – Bitwise Crypto Industry Innovators ETF, Siren Nasdaq NexGen Economy ETF, VenEck Digital Transformation ETF.
Healthcare – these themes want to capitalize on the innovations in companies that focuses on healthcare solutions, like technology for vaccines or new treatments for cancer. Few examples – iShares Healthcare Innovation UCITS, Global X Health & Wellness Thematic, Goldman Sachs Human Evolution.

What are the benefits of thematic investing?

There are a few main benefits when choosing thematic investing:

Sector independence – themes include many different sectors and aren’t limited to one sectors’ ups and downs.
Reflects changing world – thematic investments not only brings innovation into the world, but actually can change it and people can be a part of that change.
Potential higher returns – If the area you invest in through thematic investing performs well, the results for investors can be higher returns compared to other mutual funds.

What are the disadvantages of thematic investing?

As in all investing strategies, there are some disadvantages:

Short-term trends – thematic investing focuses on following certain trends, but there is always a risk of chasing a short-term trend, which won’t bring investors long-term wealth growth.
Too narrow – Thematic investment sometimes can be too narrow in assets. Diversification is an important strategy while investing since it helps to reduce risks. Some thematic portfolios are quite narrow and people who are investing in them, have a higher chance of losing the value of their investment since their portfolio is not diversified.
Volatility – if the thematic investment is too narrow, its volatility of it can be high. Investors need to balance between identifying strong trends and maintaining a diverse portfolio.

What thematic ETFs does Fundvest offers?

(ESGE) Lyxor MSCI Europe ESG Leaders UCITS ETF
(EDMU) iShares MSCI USA ESG Enhanced UCITS ETF
(RENW) L&G Clean Energy UCITS ETF
(SNSR) Global X Internet of Things UCITS ETF
(ECOM) L&G Ecommerce Logistics UCITS ETF
(WCBR) WisdomTree Cybersecurity UCITS ETF
VanEck Video Gaming and eSports ETF (ESPO)
(XAIX) Xtrackers AI & Big Data UCITS ETF
(ECAR) iShares Electric Vehicle & Driving Tech UCITS ETF
(GNOM) Global X Genomics & Biotechnology UCITS ETF
(LERN) Rize Education Tech and Digital Learning UCITS ETF
(FOOD) Rize Sustainable Future of Food UCITS ETF
(HEAL) iShares Healthcare Innovation UCITS ETF
(SKYE) First Trust Cloud Computing UCITS ETF
(BCHN) Coinshares Global Blockchain UCITS ETF
(EFPX) First Trust IPOx Europe Eq Opp UCITS ETF
(VVMX) VanEck Rare Earth and Strategic Metals UCITS ETF
(ROAI) Lyxor Robotics & AI UCITS ETF
(IQQQ) iShares Global Water UCITS ETF
(DPGA) L&G Digital Payments UCITS ETF
(ETLI) L&G Pharma Breakthrough UCITS ETF
(CT2B) iShares Smart City Ifrastructure UCITS ETF
(CAVE) VanEck Smart Home Active UCITS ETF
(SMAFY) Amundi Smart Factory UCITS ETF
(BLUM) Rize Medical Cannabis and Life Sciences UCITS ETF
(INFR) iShares Global Infrastructure UCITS ETF
(IUSB) iShares Global Timber & Forestry UCITS ETF
(GDIG) VanEck Global Mining UCITS ETF
(VOOM) Lyxor Global Gender Equality (DR) UCITS ETF
(LI7U) Global X Lithium & Battery Technology UCITS ETF
(OSX4) Ossiam Eu ESG Machine Learning UCITS ETF – 1C EUR
(BETS) Fischer Sports Betting & iGaming UCITS ETF
(LUXU) Amundi S&P Global Luxury ETF

investing strategy

Getri
August 3
Truths of Investing

In investing, no one is 100% right. And you don’t have to be right all the time. There are investors who are only right 30% of the time, but they earn far more than the vast majority of market partici-pants. Discipline and an investment strategy are what it takes to make money. These elements are key even if your accuracy is low. analysis works. It really works. But I will not teach it. It is an art that everyone understands and applies in their own way. But you can be assured that it does work.

People lose money using technical analysis because they choose the wrong time period, Or rather too short of a time period.In short time periods, the price behaves chaotically and is difficult to read from the charts. Experience shows that over longer time periods, technical analysis gives more accu-rate signals (daily, weekly or monthly).Of course, you need a lot of patience for such long periods, but that is what investing is about.For the patient, the sky is the limit, for the undisciplined, losses will occur.

The following chart may be a bit old, but it illustrates this point very well – you don’t have to be right all the time in investing, but you do have to have discipline and follow a clear strategy.

You can see Lance Roberts’ comments on the price chart and moving averages in this image, but it would be useful for everyone to seek their own truth in it.

The hardest part of investing is the psychology. It seems easy at first, but any practitioner can attest that psychology and discipline account for half the results.

Many times you will see bigger or smaller price drops in the market. Sometimes a 4-5% sell-off can look like a new recession, so it is crucial to always keep an eye on longer-term charts and indicators. The following picture is a good illustration of negative and recessionary periods in the markets, and there are many of them.

Further to investor psychology, it is important to be able to filter the information that circulates in the public domain. You may have noticed that there are many people who start commenting on the financial markets without even understanding what it is or how it works. Novice investors have a fragile psychology and often fall victim to such unfiltered information. They lose their own opinions and start following the noise.

It seems that as individuals we are looking for validation of our thoughts or ideas in order to feel more secure about our decisions. But it is always worth considering whether those sources of information are reliable. For example, do economists working in Lithuanian banks have a good understanding of Bitcoin? Certainly not. They work on the basis of theories and, as you know, their theories say nothing about a technological revolution like Bitcoin. But they still start commenting on things they do not understand at all. And of course, they are rarely right when they talk about things they do not understand. This is noise. You need to avoid the noise in order to be able to use your head and learn from your mistakes.

The following illustration shows the emotional reactions of ignorant investors to market movements and their irrational decisions based on these emotions.

At the beginning of my journey as an investor, I saw this exact illustration and thought that you have to be stupid to play on emotions. But then I tried this thought experiment. Before every crisis, I would turn the chart of the S&P500 index so that it showed me a picture as if I did not know that a market crash was just around the corner. And I can tell you that I used to want to buy those charts. I wanted to buy every dip in the market, just as I had done before. And all the moving averages and price candles looked attractive. But it was a deception. This investment strategy would have driven me into bankruptcy. So when I realised that my own psychology was weak. Instead of looking at how to generate money, I evaluated how best to protect myself on the markets.

investing strategy

Definition

Sector investing vs. Thematic investing

How thematic investing works?

What are the benefits of thematic investing?

What are the disadvantages of thematic investing?

What thematic ETFs does Fundvest offers?

investing strategy

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