In recent years, disruptive ideas, innovations and economic forces have reshaped the way we invest. Accelerating these forces is the COVID-19 pandemic and its immense effects on the economy, technology, government and society. An important goal in today’s investment industry has emerged as a powerful way not only to keep up with change, but to take advantage and profit from it: investing in innovation or investing. ” thematic “.
Broadly speaking, thematic investing is the approach of capitalizing on future trends while avoiding fads. Thematic investing takes a top-down approach, giving investors the opportunity to generate alpha (excess returns) by examining global trends and innovation. Its forward-looking approach contrasts with an investment strategy that relies heavily on market capitalization to determine the weights in a portfolio found in popular index funds and ETFs. Basically, the goal of thematic investing is not only to generate superior returns, but also to evolve from traditional index investing which sometimes misses opportunities in emerging technologies and companies. According to research from Ark Investment Management LLC, focusing on the best technology platforms and themes is expected to generate more than $ 50 trillion in business value and wealth creation over the next 10 to 15 years, giving investors today the opportunity to capitalize significantly and reap future gains by investing in innovation and global themes.
Clean and green: Structural change in global energy production and use is accelerating. Clean, sustainable energy is here to stay, and companies involved in renewable energy production, storage and smart grid implementation stand to benefit. Adding more favorable winds to this area of growth, many developed countries and governments have subsidized their success, with billions being invested to continue the transformation of carbonaceous fossil fuels. Think of electric vehicles, battery technology, solar power, wind power, and lithium mining as examples.
Health Technologies, Genomics and the Future of Health Care: Science and technology are enabling profound and transformative changes in health care. While “genomics”, “increased longevity” and “telemedicine” are the current buzzwords, we believe that, more broadly, the emphasis should be on “the economy of care”. People are living longer and expectations for quality of life are rising. Instead of thinking narrowly about traditional healthcare, we are also looking for high growth candidates from the broader “wellness” industry. Think about telemedicine, gene sequencing, and immunotherapy.
Remote work, e-commerce and cloud computing: The confinements needed to contain the COVID-19 virus have shifted our professional lives to our homes. It is not clear whether the trend of working from home will continue. The physical world will give way to the digital or “metaverse” world. The areas of opportunity are wide ranging, ranging from cloud computing, virtual networks, e-commerce, social media, video games and cybersecurity. From Zoom to Minecraft to TikTok, the way many people spend their time (and money) has changed and will continue to evolve, presenting significant investment opportunities.
Artificial Intelligence and Big Data: Artificial intelligence touches us every day, from simple internet searches to mobile directions and streaming TV. Companies focused on acquiring and interpreting as much data as possible have proven to be better able to enrich their offerings and improve their targeting. We anticipate significant growth in companies focused on creating efficiency in data mining, analysis and storage. Think about autonomous vehicles, smart homes, and the Internet of Things.
Blockchain, cryptocurrency and financial technology: The emerging fintech industry has transformed stable businesses like lending, insurance and banking into exciting and innovative places to invest. Mobile payments, digital wallets and peer-to-peer lending are expected to revolutionize the financial sector, which impacts all sectors of the global economy. With blockchain technology, the rise of cryptocurrency has turned the view of currencies and stores of value upside down. The idea of a “decentralized” financial system has immense potential as well as risks. We believe cryptocurrency is here to stay and should be part of a well-diversified portfolio.
Be a trend follower: add innovation and theme to your portfolio: Investing in exciting trends and innovation becomes much easier for the average investor. Many companies and thought leaders are happy to share their latest ideas. Whether it’s Cathie Wood from Ark Investments sharing her trades daily, or Global X creating a new ETF whenever he feels a catalyst to deserve it, there is no shortage of good investment trends to follow. Investment advice has never been so accessible and transparent.
Adding thematic and innovative investment ideas to your portfolio should always take place against the backdrop of a good financial plan, proper assessment of risk tolerance and your tax bracket. Work with your financial planner and wealth manager to structure a forward-thinking portfolio that makes sense to you. Done right, a well-diversified portfolio that includes thought leadership in the future with a focus on innovation will help you achieve your long-term investment goals. Welcome back!
Investing involves risks which may include market fluctuations and possible loss of capital value. Particular investments may not be suitable in certain situations. Carefully consider the risks and possible consequences before making an investment decision.