How to invest in thematic ETFs?


Welcome once again to our blog! If you have been paying attention to the latest updates, you probably already know that we recently told you about thematic ETFs.

To remind you that the thematic ETF is a type of financial product that consists of capitalizing on specific social trends, in order to try to obtain profitability with very specific themes. An example we gave you was artificial intelligence, and in general the whole technological world, which has obviously had a great advance in the last decades, and specifically in the last few years.

According to the analysis of a large number of investment experts, thematic ETFs have been the financial product par excellence of the recent years 2020 and 2021. In a market that has been strongly affected by the social events we have experienced, with the pandemic, restrictions and confinement, the thematic ETFs have been able to grow and become the reference for many investors.

But… How do you invest in thematic ETFs? What do you need to know about them to be able to add them to your investment portfolio and make profits with them? We are going to tell you everything in more detail… Keep reading the post to stay up to date!

The importance of good analysis

In order to find thematic ETFs that are worthwhile, and that will be economically profitable at some point, it is very important to have knowledge about what is happening in the world. We talk romantically about having a good or bad eye, but this is always dictated by having data and truthful information that makes us make decisions.

Based on that prior research into what is going on, we can form our own objective opinion and belief about which thematic ETFs are profitable or not. First of all, the story behind that ETF must be solid and make some sense. We can’t possibly not connect with what we are being told, or, while it may seem like a good idea, we don’t think it will be very successful going forward.

The future is everything. It is also necessary to weigh up whether a subject is interesting, even if it is imagining that it will not take off for a few years. That kind of profitability, in the long run, can also happen and in many cases it is worth it. And, precisely in relation to the issue of the future, it is also important to have a strategy for investing in ETFs but to be minimally flexible with the possibility that as the years go by, things may change.

So, if you are determined to invest in thematic ETFs, the steps are as follows. You should analyze the market, read up on the subject and draw conclusions about the thematic ETFs that are being mentioned the most. This analysis exercise will help you make concrete decisions: how much to invest, how to invest, how to include it in the investment portfolio and when to take it out if you see that things are going badly.

Characteristics of thematic ETFs you need to know about

Now that you know how important it is that before investing in thematic ETFs, you spend a period of reflection, analysis and decision making, you may be interested in other features of this type of financial product. This is also important when making decisions about your investment strategy once you have studied, analyzed and chosen interesting funds or themes.

Well, another detail you should know is that thematic ETFs can make a lot of money, but they also carry a lot of risk. The higher the return, the greater the possibility of losses, and this is something to take into account when deciding how much importance to give to a thematic ETF in our investment portfolio.

To give you a concrete example, there are some technology sectors that have suffered large variables in a matter of weeks, and this is precisely the risk to take if what you want are high returns. The robotics and automation sector, for example, had losses of 16% in 2018 after showing great promise in 2017. However, the following year, in 2019, profits quickly rose to 32%.

What can you do against this risk of thematic ETFs if, in reality, you are calm investors who cannot afford such ups and downs? Well, use thematic ETFs as a more complementary product. If, for example, you have a solid portfolio based on financial products with much less risk, what you can do is deposit a small part in one of these ETFs and try your luck, but without making it the backbone of your investment portfolio.

As the months go by, and as long as you analyze well how the profitability of one of these ETFs has been in the last months, or in the last year, maybe you can give it more importance. But, now, with full knowledge of the facts and knowing perfectly well why you are making the decisions you are making.

Generally speaking, we recommend that you always read a lot about investments before taking the plunge. That you visit many websites and online brokers to know what it is all about and to form your own opinion about it. And, of course, whenever you can, always consult our blog where we will inform you properly about some types of products, such as the thematic ETFs, as well as about some novelties and news in the world of investments.

Leave a Comment

Your email address will not be published.