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What Is Thematic Investing or Portfolio Themes?

By Anna Yen
thematic investing

Thematic investing is the trendy, popular kid on the investment scene – arguably for good reason. Thematic ETFs use a targeted combination of stocks and bonds to help investors fund (and make money on) their passions, new technologies and even affect environmental and societal change. 

In this way, investors can use their portfolios to reflect their personal and investment preferences at the same time. But before you run out to invest in any old fund, let’s take a deeper look at what thematic investments are and how they can benefit your portfolio. 

What is thematic investing?

Thematic investing provides investors with opportunities to invest in big ideas and themes that span specific goals, companies, and industries. For instance, thematic portfolios might focus on:

  • Clean or renewable energy
  • Artificial intelligence
  • Online gaming
  • Socially responsible investments
  • Assets that produce growth, income, or both

With portfolio themes, investors can do more than grow their wealth – they can invest in the environment, their communities, and future technology, too. 

How does thematic investing work?

In some cases, thematic investors use themes to capitalize on anticipated changes, such as advancements in healthcare and technology. In others, investors invest in their passions and values. One popular example includes ESG funds that focus on environmental, social and governance criteria. 

Regardless of the specifics, investing in themes generally works the same way. Thematic funds and ETFs (essentially “baskets” of stocks and bonds) hold securities correlated to a trend or idea. These usually include key organizations that use or create tools, technologies, and societal change within the theme. 

Investors then invest in these ETFs by buying fractional or whole shares to access instant diversification, easy organization, and target their goals. 

Adding thematic investments to your portfolio

Thematic investing typically focuses on a narrow or specialized selection of securities (in our case, ETFs) to capitalize on preferences, goals, and future trends. As such, while thematic funds provide several benefits, investors should also remember to maintain diversification

Before you start adding themes to your portfolio, it’s often wise to start with a core portfolio of diversified ETFs, stocks, or bonds. Then, you can add specialized thematic funds. 

By taking this “core-satellite approach,” investors can combine low costs, diversification, and lower volatility with thematic ETFs that align with their goals and promote strong performance potential. 

Not sure if you have enough to invest? MoneyLion Round-Ups put investing on autopilot by rounding up your transactions straight into a savings or investment account. 

Investing in themes with MoneyLion

If you want to invest in portfolio themes, MoneyLion can help! We offer three portfolio themes powered by industry leaders Global X and Wilshire. Each portfolio theme aligns to a specific trend or goal:

  • Future Innovation invests in ETFs that focus on disruptive technologies like robotics, AI (artificial intelligence), and autonomous cars
  • Greater Good focuses on companies that follow environmental, social, and corporate governance guidelines to build a better future
  • Earn & Grow gives investors a chance to boost their returns with dividend-paying equity ETFs that balance higher yield with moderate growth

MoneyLion’s thematic portfolios complement our broad array of risk-based core portfolios offered in our fully managed investment accounts. Each MoneyLion member receives a personalized risk-based portfolio to serve as their “core” allocation and expose them to a broad mix of equities and bonds. 

And if you want to invest in your values, you can add any of our thematic portfolios for further diversification anytime! 

Benefits of adding thematic ETFs

Investing in thematic ETFs lets you invest in a variety of themes, without worrying about whether the individual themes are properly diversified overall, which provides multiple benefits.

Easy diversification 

One of the primary benefits of thematic ETFs is adding instant diversification at little cost. By adding themes to your core portfolio, you can spread your funds across a wide array of securities, companies, and industries in just minutes. 

And if you invest with MoneyLion, you’ll never pay asset-based management fees or trading fees! All it costs is $1/month, with no hidden charges.

Invest in your values and passions

Another benefit of adding portfolio themes to your holdings is the ability to invest in your values, passions, and goals. You can invest in environmental and social change, companies that treat their workers well, and even the next generation of cutting-edge technology. 

Boost your returns

Nothing is guaranteed in investing – especially not performance. But some thematic portfolios have the potential to generate higher returns to compensate for their increased risks. Others focus on growth and income, which can grow your returns even more. 

Risks of thematic investing

However, thematic portfolios, like all investments, carry some risk. 

Volatility

Because thematic investments tend to have a narrow focus, they can carry more volatility risk than other investments. Typically speaking, the narrower your focus, the more you risk losing your investment if the underlying sector, industry, or theme crashes. 

Low Diversification withinfunds

Investing in themes can enhance your core portfolio’s diversification. However, many thematic funds take a very narrow focus. So if you only invest in thematic portfolios, you may stunt your diversification.   

MoneyLion makes investing easy! 

If you’re ready to invest, a MoneyLion investment account makes it easy with no high minimums or requirements. In fact, you can open an account anytime with just $5! Plus, MoneyLion charges no asset-based management fees or trading fees – just a small, $1 per month administration fee. You can put your investing on autopilot with automatic contributions, leaving the emotion out of it.

If you’re ready to diversify your portfolio, even more, MoneyLion’s new Crypto Account may be just what you’re looking for. Simply sign up for a RoarMoneySM account to invest in Bitcoin and Ethereum like a pro. Use your spare change with Round-Ups to help you start small and build your investments with confidence.  

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