Thematic ETFs are investment funds that target specific, long-term trends. These trends can be related to new technologies, demographic shifts, or how we use resources. Instead of following broad market indexes, thematic ETFs select companies that are expected to benefit from these particular trends.
The Essence of Thematic Investing
Imagine the trend of electric vehicles (EVs). A thematic ETF focused on this wouldn’t just invest in traditional car companies. It would also include companies that make batteries for EVs, the materials that go into those batteries (like lithium), and even charging station companies. The theme here is the growth of electric transportation.
Another example is the theme of cybersecurity. As our lives become more digital, protecting data is crucial. A cybersecurity thematic ETF would invest in companies that provide software and services to prevent cyberattacks, regardless of whether those companies are classified as traditional “tech” companies or operate in other sectors.
Consider the theme of the ageing population. As people live longer, there’s a growing need for healthcare, specialised living facilities, and related services. A thematic ETF in this area might invest in pharmaceutical companies, medical device makers, and companies that manage retirement communities.
Things to keep in mind
1. Understand the Theme: Be sure you are aware of what the ETF invests in.
2. Check what’s inside: See the list of companies the ETF holds.
3. Consider the cost: ETFs have fees, called expense ratios.
4. Possible ups and downs: Investments based on specific trends can sometimes be more volatile.
Thematic ETF lists
| Ticker | ETF Name | Fund House | Expense ratio | Holdings | AUM |
|---|---|---|---|---|---|
| BOTZ | Robotics & Artificial Intelligence | Global X | 0.68% | ~70 | ~2.7B |
| IRBO | Robotics and Automation | iShares (BlackRock) | 0.47% | ~130 | ~580M |
| ROBO | Robotics and Automation Index | ROBO Global | 0.95% | ~80 | ~1.4B |
| AIQ | Artificial Intelligence & Technology | Global X | 0.68% | ~80 | ~270M |
| WIR | WisdomTree Artificial Intelligence and Innovation Fund | WisdomTree | 0.45% | ~150 | ~30M |
| CLOU | Cloud Computing | Fidelity | 0.60% | ~60 | ~1.5B |
| WCLD | Cloud Computing | WisdomTree | 0.45% | ~60 | ~3.0B |
| SKYY | Cloud Computing | First Trust | 0.60% | ~70 | ~1.1B |
| IVES | Cloud Computing | Wedbush | 0.40% | ~50 | ~100M |
| DBUZ | Cloud Computing | AdvisorShares | 0.75% | ~40 | ~15M |
| CIBR | Cybersecurity | First Trust | 0.59% | ~40 | ~6.5B |
| HACK | Cybersecurity | ETFMG | 0.60% | ~65 | ~1.8B |
| IHAK | Cybersecurity | iShares | 0.47% | ~30 | ~270M |
| SPAM | Cybersecurity | Themes | 0.35% | ~40 | ~60M |
| BUG | Cybersecurity | Global X | 0.60% | ~30 | ~180M |
| ICLN | Global Clean Energy | iShares (BlackRock) | 0.41% | ~100 | ~2.6B |
| TAN | Solar | Invesco | 0.67% | ~60 | ~2.3B |
| FAN | Global Wind Energy | First Trust | 0.62% | ~60 | ~370M |
| QCLN | Clean Energy | First Trust | 0.60% | ~50 | ~400M |
| HYDR | Hydrogen | Global X | 0.50% | ~30 | ~100M |
| IBB | Biotechnology | iShares (BlackRock) | 0.45% | ~200 | ~7.3B |
| XBI | S&P Biotech | SPDR | 0.35% | ~190 | ~7.0B |
| ARKG | Genomic Revolution | ARK Invest | 0.75% | ~50-60 | ~1.7B |
| BBH | Biotech HOLDRs | VanEck | 0.35% | ~20 | ~300M |
| BIB | Ultra Nasdaq Biotechnology | ProShares | 0.95% | ~340M | |
| LIT | Lithium & Battery Tech | Global X | 0.75% | ~40 | ~2.8B |
| DRIV | Autonomous & Electric Vehicles | Global X | 0.68% | ~75 | ~480M |
| BATT | Battery Tech & Lithium | Global X | 0.68% | ~80 | ~250M |
| IDRV | Electric Vehicles and Driving Tech | iShares | 0.59% | ~100 | ~170M |
| KARS | Electric Vehicles and Future Mobility | KraneShares | 0.70% | ~75 | ~280M |
In Conclusion
Thematic ETFs present a compelling way to invest in the megatrends defining our era. They offer a focused, diversified, and accessible means to participate in potential high-growth areas. As innovation continues to accelerate and global landscapes evolve, thematic ETFs can serve as valuable tools for investors seeking to shape their portfolios around the future they foresee. Diligent research and a clear understanding of the chosen theme are essential for harnessing the potential of these dynamic investment vehicles.
