What is Thematic Investing?
Thematic Investing is a futuristic way of investing in the stock markets where you can identify large opportunities or invest in your preferred ideas or current trends without having to do detailed fundamental and technical research on individual stocks. Due to the limitation of time and expertise, most people do not have effective equity portfolios in spite of having the right investing ideas. Thematic Investing solves this problem and allows you to invest in over 100 different unique and specialized themes which can give you concentrated exposure in line with your thinking. To learn more about how it works, read this.
Thematic Investing is a platform which you can use to invest in the most effective way possible and in the least amount of time. Since the business environment is a constantly changing one, investing in ready-made themes gives you firepower to focus on larger ideas than delve into the minor nitty gritty which can deter your progress. Make effective use of your time and energy to earn higher returns than mutual funds using our Thematic Investing Platform.
10 benefits of Thematic Investing:
1. Powerful portfolio structure
2. It has compact themes which give you a concentrated exposure to events, government policies, ideas, current trend etc.
3. The diversification is limited and optimal unlike mutual funds.
4. You can earn much higher returns than mutual funds.
5. It is really easy to make smart investment decisions.
6. Themes can be customized based on your preferences.
7. Get 3 versions of every theme depending on your risk profile (High, medium, low)
8. Pay only ₹100 per theme as opposed to 2.5% of investment to mutual funds.
9. It is an intuitive and self-explanatory way of investing in the Indian stock market.
10. It is also an educational experience as you can learn about the business environment.
Using Thematic Investing to construct a portfolio around your ideas:
In our dynamic business landscape, capital flows across the globe are driven by themes
Everyone has different ideas, notions and convictions of the future. Hence, a one-size fits all approach is not the best way to approach investing. What might be a good investment for your friend, may not necessarily be suitable to you. Hence, it is ideal to invest in several themes that you believe will do well in the future. It gives you an opportunity to leverage on your ideas without having to go through the Herculean task of stock research.
• Social beliefs and causes
• Geographical parameters
• Government policies
• Specific sectors
• Current trends in business
• Business groups and conglomerates
• Dividend strategies etc.
Each of the above categories have several themes within them which you can choose from. They are designed keeping in mind the vast variety of preferences among the investing community in India. It is a good idea to invest in multiple themes. Unlike mutual funds which are mostly generic, each theme is unique and idea-centric. Investing in different themes gives you a very effective diversification. For instance, if you invest in 5 different equity mutual funds you will be surprised that your stock holdings will overlap more than expected thereby having the opposite effect of what you originally intended to achieve. On the other hand, if you invest in 5 different themes through Thematic Investing, you have exposure to different sectors/ideas/trends which will not overlap like mutual fund investments. This gives you a unique advantage: If your convictions turn out to be right, you could make a lot more money than what is possible through mutual funds. So make sure you diversify your investments so that you increase your chances of earning high returns. Using our themes, you can build powerful portfolios which can be easily customized and changed whenever without any restrictions.
How to choose themes:
Although we have over 100+ themes on our Thematic Investing platform, choosing themes is really simple. It’s the equivalent of online shopping when it comes to financial markets space. Keeping in mind the wide variety of parameters that people use to pick investments, we have displayed key information about each theme which help you make the best possible investments:
• – Since we construct new themes based on new events, ideas, trends and popular demand, the Index value show you the base value of the theme from a starting date. Currently, the starting date of all themes is 1st January 2014. It gives you an overall value of the theme similar to Net Asset Value (NAV) of a mutual fund scheme. It makes it easier for you to track the performance of the theme at one glance.
• – You can choose themes based on how much returns they have earned in the past. You can sort them by 1 year and 1 month returns. Make sure to double click to toggle successfully.
• – It is a measure of risk-adjusted return of the theme. You can analyse the risk-return characteristics of every theme by the Sharpe Ratio. It explains whether the returns achieved in a theme is due to too much risk or smart investment decisions. On our platform, we have given a ranking from 1 to 3, with 3 being the highest rank.
• – In any stock market investment, prices vary and progress is almost never a linear curve. Volatility is a measure of price variations in comparison to the benchmark. A theme/portfolio with lesser volatility is considered safer in comparison to a highly volatile one. But keep in mind that volatility is a result of expectations of investors. Volatility is be good sometimes but not necessarily all the time. A company, theme or a portfolio will have to strike the fine balance when dealing with volatility. An excess of volatility or the lack of it are not desirable.
• – Shows you the short-term performance of themes for the last few days. It is useful if you want to know which themes have started trending upwards or downwards in the last one week.
• – If all this is too much for you and if you want to choose from the best-performing ones, then click on this function to view the top 10 best-performing themes. This list changes on an ongoing basis based on the performances.
• – These themes are further curated based on their overall performance metrics including sharpe ratio, volatility and short-term trend. This list changes on an ongoing basis based on the performances.
• – Filter themes based on the minimum amount you are willing to invest in a theme. On our Thematic Investing platform, the minimum theme size is below ₹1000. Although there is no upper limit on how much you can invest in a theme, there is a lower limit based on the value of shares and weights.
3 Risk Profiles: To add flavour to the existing customization on Thematic Investing, You can optimize each theme based on your risk preferences. For instance, an investor who wants to invest in a theme but wants to reduce risk can choose the “Low Risk” version to optimize stock weights accordingly. Similarly, if an investor is aggressive and seeks the highest possible return, then he may choose “Maximum Return”. By default, all themes on our platform are equi-weighted which means that all stocks get either an equal or the best equivalent weight in the theme.
Key to successful Thematic Investing:
In order to be successful, you will need to identify emerging opportunities / structural shifts and invest in themes which give you a concentrated exposure to them. It should be an investor’s priority to monitor and assess the potential on a timely basis. Your chances of success will increase significantly if you are familiar with the theme and have conviction about its future potential.
Tejas is the Co-Founder & CEO at FYERS, the youngest team to get NSE’s broker license. He has a specialization in finance and has over 10 years of work experience spanning across proprietary trading, risk management, and broking. Tejas & his team started FYERS, a technology-focused brokerage as a mission to transform the trading/investment landscape in India.