Thematic Investing is a new concept in India and is looked at for global investment trends. The stock market in India started with equity, mutual funds, derivatives and ETF’s. Next in the line is THEMATIC INVESTMENT.
Thematic Investing is the futuristic way of investing in the stock market. Instead of investing in individual stocks, you invest in a portfolio of stocks which is based on some theme.
What is Thematic Investing?
Thematic Investing is considered to be a Top Down investment approach with a focus on broader and macroeconomic themes. Basically, it allows you to invest in different ideas, themes or portfolios without getting into the stock stipulations.
When it comes to money, generally we would like to invest in the ideas that resonate our thinking. Thematic investing provides us with a platform to invest in these ideas hassle free.
In layman terms, you are investing in a portfolio of company shares instead of individual stocks. And the portfolio of companies designed will resonate with a theme.
This new way of investing is still nascent which deserves a lot of attention as you don’t really have to do any fundamental research on companies. But yet you can go on and invest in these portfolios and earn a profit.
Do you think the cashless economy will be the next big thing? Or Do you think housing finance companies are the next big sector to benefit? With thematic investing, you can invest in a theme of the Cashless economy or a theme of housing finance companies.
A theme related to these sectors will be designed with a certain number of stocks. You need not search the individual companies which may benefit from the cashless economy. The research will be done and you just need to invest in these set of stocks.
Have a look at the themes available at fyers who provide this opportunity of thematic investing.
As you can see, there are many themes related to Sugar Industry, Chemistry Labs.
What sounds interesting is the return on investment across these sectors. It is very easy as a retail investor like you to not go into the specifics of fundamental and technical research of individual stocks and invest in a portfolio of stocks.
How different is Thematic Investing from Mutual Funds?
Thematic investing is the most efficient way of investing in the stock market if you are unaware on How to invest. But yet another route to invest in the Stock market is through equity mutual funds. But certainly, there are some differences which will make Thematic Investing to stand out.
#1) Mutual funds are old age idea. Thematic investing is a recent trend which you don’t want to miss. As an investor, we need to take up risks and move with the recent trend happening in the industry. Remember Why Nokia failed against Apple? We have to adapt to changing conditions and thematic investing is the opportunity now.
#2) Mutual funds are associated with load charges and expense ratio which is usually around 2% of the investment. So, if your investment is around 1,00,000 INR, then you end up paying around 2000 to the mutual fund house. This is not the case with Thematic Investing. Fyers is charging flat 100 INR on investing or rebalancing. So Thematic investing is winning over mutual funds in the category of fees charged to customers.
#3) Fund manager decides the fate of your money in the mutual fund. But YOU are empowered in thematic investing to rebalance / redempt / invest at any point of time. I would say the process is opaque in mutual funds compared to the theme you have invested in.
Key to Success in Thematic Investing:
In order to succeed and earn good returns on investment, you need to identify the emerging opportunities and structural shifts happening in the economy.
Next step is to identify the theme which resonates with your idea. Once you identify the theme, you can customise the stocks in the portfolio theme and invest in them.
You will be charged a flat 100/- INR.
It should be on priority to monitor, examine and assess the potential of the theme from time to time. Your chances of success will increase significantly if you are aware of the developments and convinced in its future potential.
Who is offering services of Thematic Investing in India?
Thematic investing is still evolving and not gained much popularity though. The market will gradually accept the trend but it will take time.
As far as I know, none of the established financial service firms are providing investment platform for this kind of investment. Indian equity market is well positioned to exploit the benefits of thematic investing.
At present, these are the companies providing the platform for thematic investing:
SmallCase – backed by Zerodha
I have come across these three platforms. Please let me know in the comments if you have come across any service providers so that I can add it to the list.
I am ready to kick start my investment and earn a good decent income. I am starting with Fyers.