Meta – Investors without the time or resources to devise investment strategies that meet their financial goals can use ready-made portfolios and thematic investing.
Technology has vastly improved the individual’s accessibility to the financial market and products. There is also greater awareness of financial products today, and their pros and cons. However, for a young investor or someone unable to keep a close eye on financial markets, investment planning can still prove intimidating or, perhaps, just cumbersome.
Ready-made Portfolios to the rescue
For anyone with a keen eye on global and domestic developments, access to the right tools and information and the ability for thorough research can crack the code on sound investments; though given its time-consuming nature, it is easier said than done. Given the far-reaching consequences of a well-managed investment portfolio on one’s future quality of life, it is smart to seek professional help in this regard.
Among various financial products and investment strategies already available to investors, one concept garnering wider interest now is that of ready-made quality financial portfolios.
What are ready-made portfolios?
Ready-made portfolios are structured products that are either a specific set of stocks or multiple asset classes (equity, mutual funds, exchange-traded funds or ETFs), managed under individual theme-based or thematic funds. These thematic funds are placed to gain from well-researched trends or themes anticipated to play out through longer-term social, political, technological, or economic developments.
Ready-made portfolios, such as the ones offered by StoxBox, are based on the top-down investment strategy of thematic investing, where a broader theme or strategy dictates what assets make up the portfolio.
Ready-made portfolios are highly customisable multi-asset thematic investment boxes for individual investors with their own specific risk appetite and market view. These thematic boxes could either be sectoral funds, aimed at long-term capital appreciation through investments predominantly in a specific sector of the economy; or one with a dynamic switching between multiple asset classes based on the market situation.
Breaking down thematic investing and ready-made portfolios
Thematic investing begins with settling on a broad theme that is predicted to play out in the future. Products such as StoxBox allow investors to pick from a variety of theme-based funds, where the underlying stocks or ETFs are weighted and customised following research and back-testing.
One’s success with thematic investments lies in being able to predict or spot a macroeconomic trend with a sizable payoff in the short to long-term. It is also generally understood that not all companies or asset classes will equally benefit from a particular trend that emerges in the future. On that note, an investor’s financial risk with these thematic boxes is still well-diversified across various stocks and other asset classes that reflect the theme.
One’s financial exposure in a thematic box is still diverse compared to investing in a single company’s stock. Individuals interested in thematic funds could further diffuse their concentrated investment risk by investing across various thematic boxes.
Advantages of investing in ready-made portfolios
A regular retail investor, however capable, has access to limited resources when planning his/her highly individualistic investment strategy and financial plan.
Meanwhile, ready-made investment portfolios are created by professionals or fund managers with expertise across technical, quant, and fundamental research methodologies. These experts begin by determining the theme that will be the basic premise on which the ready-made portfolio is built.
These investment strategies could be from a long-term perspective supported by ample data points, not just mere speculation, or they could be short-term ready-made portfolios with a dynamic strategy based on technical and fundamental analysis.
Professionals research various themes through careful study of sectors and sub-sectors across the broader economy. A further selection of the pool of assets for a specific fund is based on proprietary algorithms.
Why invest in ready-made portfolios?
Ready-made quality portfolios allow retail investors to access and financially benefit from, a variety of effective investment planning tools and strategies without starting from scratch.
- Smart Beta – Products like StoxBox offer thematic boxes based on the smart beta strategy of investment, which tracks a particular index but modifies individual components based on predetermined financial metrics. Essentially, opting for such ready-made portfolios help investors benefit from passive and active investing strategies.
- Technical Analysis – This strategy entails studying previous patterns in financial markets by means of price charts and statistics and predicting future market movements. Such thematic boxes allow retail investors to get in early on future potential market performance, backed by extensive technical research.
- Fundamental Analysis – These thematic boxes are created with the help of fundamental research that factor in macroeconomic influences, such as industry conditions and the overall state of the economy on particular financial assets.
- Long-term – As the title suggests, such thematic boxes utilise fundamental research to create a portfolio that looks to benefit from predicted long-term trends through the study of macroeconomic or external factors on asset classes. Some of the factors that are studied include the macroeconomy and related factors, such as gross domestic product, interest rates, sectoral growth—production, manufacturing, employment statistics etc.
- Sector-wise – This thematic box combines the benefit of fundamental research into individual sectors with the advantage of the smart beta strategy.
- ETF Boxes – These are tweaked multi-asset (equity, commodities, debt) ETF
In a nutshell, thematic investments allow individuals to benefit from opportunities arising out of the complex confluence of various predicted developments in the real world. Meanwhile, ready-made thematic portfolios prepared by fund managers allow individuals without extensive resources or the time for research, to benefit from in-depth, professional analysis..
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