Think carefully before you buy shares in a thematic exchange-traded fund (ETF). It might seem you’re making a smart move to capture investment trends that might otherwise be elusive. That’s what the marketing spiel will say and that’s what you’ll tell yourself (then again, whoever made an investment thinking it was a dumb move?). Chances are, however, you might just as well be putting money into a fund that tracks an index for growth stocks. When it boils down to it, that’s all thematic investing is – growth-stock investing dressed up for the diversified and inclusive 2020s.
Granted, I write this as a contention and not as a firmly held view based on solid research. Nor am I hostile to the notion of thematic investing in general or of using ETFs as a means to put it into practice. On the contrary, I stick to what I wrote two years ago (‘The Heineken Factor’, IC, 19 February 2021) that ETFs are the Heineken lager of investing – they reach the parts that other securities cannot reach, perhaps the most important part being thematic investing.
And I am hardly alone in this view. A survey commissioned by specialist ETF provider HanETF found that 42 per cent of almost 1,100 investors questioned had capital in thematic ETFs. That was nearly the same as the proportion who used ETFs to track a broad stock-market index and it was seven percentage points more than the fraction of the 1,100 who had money in sector-tracking funds.