Thematic Investing Research
Want to try your hand at thematic investing but are confused about where to start? What should be the research methods? How can you do productive research?
This article will give you a broad idea of the whats and hows of thematic investing and its research methods. Before understanding the research methods, let’s have a quick look at what is thematic investing?
Let’s suppose you like investing in the stock market. You also like to promote sustainable development. Rapidly increasing consumption of non-renewable resources worries you. Are you wondering, how are being environmentally conscious and being an investor connected? Yes, they are! That’s what thematic investing is all about!
In thematic investing, the stocks constituting the funds belong to diverse sectors united by a common theme. Suppose, in the above example, you go for an electric vehicle theme. For the EV theme, the fund will include stocks of the automobile industry, battery industry, metal industry, etc.
Here, you invest in any long-term theme of your choice or invest in an idea that follows any trend. A theme (e.g., rural development, infra development, etc.) can relate to an idea or a specific goal encompassing various sectors. The stocks may relate to any theme directly or indirectly.
The common steps you need to follow in thematic investing is:
- a) Spot a theme;
- b) Analyse the theme, its current status, progress, future, and targets;
- c) Identify the stocks (companies) that would be benefitted from the selected theme;
- d) Thematic investing research: Conduct fundamental, technical, and quantitative research for each of the company stocks;
- e) Invest and make money!
At times, people do not possess adequate knowledge, skills, time, or tools to go through the above processes. Such people have the option to make money by thematic investing by choosing their favorite themes.
If thematic investing interests you, but you don’t have the time to identify and do research on the stocks, you can invest through StoxBox. It provides you a readymade basket of assets linked together by a specific theme. Each StoxBox is created and managed by expert fund managers, and exposes to assets selected, weighted, and customized after conducting intensive research.
Thematic investing research methods used by StoxBox
Experts at StoxBox carry out in-depth research to map out the stocks to be included in different thematic funds. To build high returns fetching thematic funds, the experts at StoxBox use the following research methodologies:
Quant research or Quantitative research
Quant research is a combination of mathematics, statistics, and technology. It relies heavily on computers and does not involve human judgment. Quant research is purely objective in nature and unemotional. For better results, it is conducted along with qualitative research (explained below). As both forms of research have their flaws and benefits, they both are complementary to each other.
Why is quant research popular?
1) Information explosion:
Quant analysis trend is increasing as there is a huge information explosion every single minute. In this era of globalization, a large number of transactions are performed every moment, resulting in massive information eruption. The human brain has its limitations when it comes to processing information. Quant analysis uses technology to analyze data more effectively.
2) Information includes useless information too:
Hence, reducing noise (useless information) is essential to bring out worthwhile information.
3) Traditional models are broken:
The conventional models and tools used for decades are now considered unreliable due to the dynamic changes of the market. In quant research, experts execute changes and the dynamics of the agile market.
Fundamental research
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Well-known investors rely on fundamental research before investing in a particular stock. Fundamental research is the study of the fundamentals of a company. Here, investors carry out the analysis of qualitative and quantitative aspects to understand the future growth potential of a company. Fundamental research has two elements, viz, qualitative research and quantitative research.
Qualitative analysis
It includes the study of the company’s business model, its management, competitive position in the market, brand value, and other factors which cannot be quantified. This is purely based on human judgment. The perception of these factors may differ from investor to investor. E.g., the brand value of a particular company may be high for one investor while being low for the other at the same time.
Quantitative analysis
Same as explained above in quantitative research. Here, quantifiable factors are examined to test the financial health and profitability of a company. Researchers examine the income statement, balance sheet, cash flow statement, etc., of the company. Evaluation is done based on financial ratios like Price to Earnings Ratio (PE Ratio), Debt to Equity Ratio, Return on Equity (ROE), Return on Capital Employed (ROCE), Return on assets, etc.
The bottom line of this analysis remains the same for all investors as it is based on numbers.
Technical research
It is the study of the past performance of a company’s stock in the stock market. It is the analysis of share price movements based on the study of charts, price graphs, demand & supply, and other factors affecting the market. The underlying assumption in technical analysis is that the share price fashion will repeat in the future. Based on the investors’ psychology, it is believed that what has happened before is likely to repeat eventually.
Contrary to the fundamental analysis, the technical analysis examines past trends and evaluates the historical performance to plot the price patterns of the stock.
What are the advantages of investing through StoxBox?
1) Guided investment:
Young professionals who are not confident in their ability to pick winning stocks can invest in thematic funds through StoxBox. Experts at StoxBox develop well-designed thematic funds after extensive research.
2) Saves time:
Research done by the StoxBox experts is optimum for investors who lack time and are unable to give time, especially for research.
3) Benefit of in-depth research:
Investors from non-financial backgrounds can benefit from the in-depth research conducted by expert professionals at StoxBox.
4) Better returns:
Detailed research by the experts ensures better returns. Budding investors who lack knowledge of the stock market should go for thematic funds.
5) Easy to use:
Investors can make good money with the hassle-free and easy-to-use StoxBox app.
Carrying out research on a company’s stock is highly crucial, as the whole investment decision depends upon it. Thus, it must be done skeptically. However, if you find it difficult or do not have adequate time, skill or knowledge, consider investing through StoxBox. Researchers at StoxBox provide professional investment guidance through their well-designed thematic funds. StoxBox is an easy, intuitive app available on the Play Store or Apple Store that brings a range of well-designed thematic funds to aspiring investors.
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