Demystifying multi- thematic investing
Multi- thematic investing allows investors to capitalise on future trends in global markets.
It’s a forward-looking investment approach that embraces the changes happening in the world. It can help position a portfolio for a different path in the future that is being shaped by disruptive technology, changing business models and a more globalised world, for example.
When people talk about investing in stocks, there’s so many factors to consider when deciding where to invest your funds. The future is uncertain, after all, which makes it difficult for beginners to know where to start.
Thematic investing simplifies the way you invest by categorising stocks based on broad themes or ideas.
The key to thematic investing is carefully identifying structural shifts and the companies with high exposure to those shifts. As always when it comes to investing, timing is key.
In a report on the rising use of thematic investing around institutional investors, McKinsey recommends that ‘investors should assess the high-level attractiveness of the theme and make sure there are companies whose businesses are heavily exposed to the theme. An investor must monitor the theme over time to identify the right entry and exit points’, it reads.
Adopting a thematic investing approach can yield three types of benefits for investors, according to the McKinsey report.
Firstly, it allows them to generate alpha at scale by focusing on investment opportunities in hot spots where a significant amount of capital can be deployed.
Secondly, the more systematic investment process and in-depth research required for thematic investing builds a deeper understanding of the underlying drivers of value creation and risk. It also provides investors with a dynamic and flexible way to validate and express their hunches by applying a forward-looking lens to investment decisions.
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