The Rise of Thematic Investing 2022

Thematic investing 2022 is a broad form of investments done in different companies or sectors belonging to a particular theme. It considers the macro-level trends that help identify significant investment opportunities without having to research individual stocks, which can be a hassle for investors because of lack of time or expertise. For instance, if you believe that sustainable energy is the future and holds promising growth prospects, a thematic fund investment that contains stocks and shares of companies working towards integrating sustainable products may just be the right answer.

Thematic investing 2022 helps streamline one’s investment portfolio, offering concentrated exposure, which can be in-line with one’s interests and beliefs in a particular theme, backed by futuristic growth trends. The rise in thematic investing can be traced back to the last 30 years when the investment strategy entailed looking at the global economy and markets and focusing on specific outcomes rather than zeroing down on specific sectors or securities.

Thematic Framework Approach

A thematic approach would involve identifying a particular trend, such as technology, artificial intelligence, cryptocurrencies, healthcare, etc., and then investing in companies that operate in that space. A thematic approach includes in its framework the idea of moving away from the traditional fund management approach and looking at a global level for themes that are here to stay. It is one of the excellent ways to bring in one’s values in their investment strategy and positioning their portfolio in line with the next wave of disruption.

Thematic Investing 2022 Trends

The year 2020 was marked by the COVID-19 pandemic, which grappled businesses worldwide. Three distinct themes that investors eyed closely during this time were healthcare, technology and environmental stocks. Come 2022, with the vaccinations underway globally—here are certain thematic trends that we can expect to see gaining traction.

  • Pharma

The healthcare sector in India has evolved tremendously in recent times. One of the largest generics drug providers globally, the pharmaceutical exports from India grew up to$ 20.58 billion during the financial year 2019-2020. Since the coronavirus pandemic hit the world, India has emerged as a forerunner in the production and supply of COVID vaccine globally, making the pharma thematic funds a hot investment. Pharma Box from Stoxbox is a product that invests in stocks of pharma companies that have shown to generate consistent historical returns.

  • Digital India

With growing technologies being adopted across industries and sectors, the digital scene’s penetration is going strong in India. The Indian government is promoting technology for several initiatives such as infrastructure building, people empowerment, and services delivery. The changing business climate requires every organisation to go paperless and go digital in every aspect. It is why a thematic investment in the digital sphere will generate huge returns for investors. Stoxbox’s Digital Box is just the right investment fund for new investors who can invest with a minimum amount of Rs. 10,000. The product offers a CAGR of 24.96%.

  • Consumption

A rise in the middle class, changing lifestyles, and increased disposable income have given rise to this wave of consumption in India. Consumption is an umbrella term for everything such as FMCG items, consumer durables, housing, white goods, two-wheelers etc., all of which has seen a considerable boom. With a population of 1.3 billion, India will become the third-largest consumer market (next to China and the US) by 2030. This huge surge in consumption levels has led investors to flock towards this theme for investment purposes. FMCG Box by Stoxbox is a good way to stay invested in this particular theme as it consists of FMCG companies that have shown to generate historical returns over the last ten years.

Here is a list of other thematic boxes offered by Stoxbox as an investment vehicle that you can check out.

Value of Long-Term Investing

Stocks or equity investments are generally considered to be high-risk investment. It is because, in the event of a company’s liquidation, equity shareholders are last in line to receive the net proceeds due to their shares in the company’s capital. Yet, why does equity investments continue to be a popular form of investment amongst investors?

The answer lies in the hundreds of years of historical evidence that equity investors are compensated in the long term for carrying that risk. Having an equity stake in the company also means being the first to take home the net profits. A long-term investment strategy not only helps you reap profits but also gives you the time to correct any investment mistake that may have happened along the way.

Here are some compelling reasons in favour of long-term investing:

  •  Compounding

Compounding offers excellent benefits to long-term investors. The earnings produced on your investments get re-invested again, which lets you earn more on your earnings. This opportunity of compounding and growth increases with more time that your money stays invested. The earlier you start your investment journey, the power of compounding increases even more.

  •  Duration

A short-term investment will not fetch as much value as a long-term investment will. For stock or mutual fund to perform well and reach its peak, roughly a period of 5 to 7 years is required. A short-term investment strategy fails to capture the real essence of a mature investing strategy based on research and futuristic trends instead of long-term investing.

  • Risk

Short-term investments tend to get affected by the short-term fluctuations in the market. These fluctuations in the short-term do not provide an adequate opportunity to gauge your stocks’ actual performance or mutual funds. With long-term investment funds, your investments are bound to grow in size, and you get a chance to rebalance your portfolio to avoid any losses.

Are you looking for a thematic portfolio that best suits your investment needs? Head to StoxBox for a plethora of readymade theme-based boxes that experts conceptualise. You can also download their mobile app here for Android and Apple.

A great way to enjoy the benefits of well curated themes is to choose the mutual fund route. Most asset management companies offer you a variety of thematic investing options to choose from, with a sound rationale and projection, and all you have to do is pick the one that best aligns with your vision of the future. Investing via a mutual fund scheme will also help you participate in the growth of all the companies in the chosen sector, instead of investing in the stocks of just one or two companies, thus enhancing your potential for returns and limiting your risk.

Thematic funds are usually categorised as very high risk, as they are based on predictions and projected numbers. However, if you are keen on investing in the equity sector, and are prepared to bet on your vision, thematic funds offer great opportunities to beat the market. Further, your portfolio diversification will be limited if you only invest in a specific sector or theme, and this may pose added risk to your corpus. It is, therefore, advisable to diversify your portfolio and hedge your thematic investment with other investments in low risk asset classes.

If you are eager to invest in thematic funds, remember to stay invested for the longer term as most of the emerging themes are structural in nature and will require anywhere between 5 to 10 years to pan out successfully.   

[1] https://www.business-standard.com/article/current-affairs/india-retains-top-spot-as-fastest-growing-major-economy-un-report-122051900021_1.html

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