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What Is Thematic Investing And Why Is It So Special?

20 November 2015 in Investing Insights

Here at Motif Investing, we offer many ways to invest in ideas, which is also known as thematic investing. You might be wondering, what exactly is “thematic investing” anyway and why is it so special? Let’s take a closer look.

Generally speaking, thematic investing is a top-down investment approach that helps investors gain exposure to macroeconomic themes and trends through managed funds or baskets of related stocks. At Motif Investing these baskets of up to 30 stocks and ETFs are called motifs.

The Creative And Systematic Approach To Thematic Investing

So how does a thematic investment get created? First, a fund manager or trader chooses a particular theme or trend that he or she wants to invest in. Examples can include social networking, clean energy, cyber security and battling cancer. Studying various developments in technology, politics, resources and social regions can also be used to select a theme that one believes could be profitable.

Other considerations may include if the trend is deemed to be short-term, speculative or structural, and how a change in the trend could impact different regions and sectors.

Then, the fund manager identifies a list of companies or ETFs with direct or indirect exposure to that particular idea via industry, business model, product line, services, demographics, holdings, values, and/or customer base.

Next, the fund manager narrows down that list to identify the strongest stocks to represent the theme based on their predictions and factors such as liquidity, risk, growth versus value, performance, earnings estimates, new products, unique characteristics and quality of management.

A report by McKinsey describes some of the general differences between thematic and relative investing:1

Thematic Investing vs Relative Investing Framework
Source: McKinsey & Company

What are the benefits of thematic investing with Motif?

Now that you have a better sense of what thematic investing is about, here’s how Motif can help you invest thematically.

Intuitive Investing. One benefit of thematic investing is that it’s intuitive investing. You can put money into ideas and trends that are already familiar and exciting to you. Having in-depth knowledge or first hand experience in a particular trend can drive your ability to make smart investment choices. Performing your own in-depth research can also strengthen your position and improve your ability to customize your own motif portfolio. You can invest in areas that interest you such as real estate, travel and healthcare.

Align Your Values. Another benefit of thematic investing is being able to align values that are important to you with your investments. For example, if you are passionate about helping society, you could choose to invest in cause-driven motifs that focus on social responsibility, ending poverty, improving education or fighting cancer. It’s pretty neat you can help better the world through your investments.

Expansive Choice. Our investment team has created 150+ professionally built motifs. But this number is dwarfed by the 180,000+ custom motifs that more than 200,000 of our customers have created on their own. By way of comparison there are about 1,500+ ETFs, 5,000+ U.S. Listed Stocks on major exchanges and 7,500+ mutual funds available to investors. If there’s a theme or idea you’re interested in investing in, there’s likely already a motif created for it. If not, you can create your own one-of-a-kind motif.

Generate Alpha. Thematic investing can also provide opportunities for investors to generate alpha. By focusing your motifs in “hot spots” where a sizeable amount of capital can be distributed, you may be able to generate alpha at scale.2 Take a peek at the performance of some of our professionally created motif’s below. They each performed over 13 percent higher than the average one-year return of the S&P for the twelve-month period ending October 14, 2015.

Thematic Investing May Generate Alpha

Flexible And Transparent. A unique feature of our platform is we offer investors the ability to create their own motifs from scratch as well as customize any of the motifs available in our catalog. You also get a superior level of visibility, control, transparency and no hidden fees. What you see is what you own down to the fractional share and penny.

Easy Access. In the past, many investors were unable to gain exposure to thematic investing because the portfolio structures were expensive, restrictive, complex, and time consuming to maintain. Most of the investing opportunities were only available to high net worth individuals.3 Fortunately, thematic investing has gained popularity in recent years and Motif is helping to democratize access for investors of all sizes.

You can also keep tabs on your portfolio and trade on the go with our iOS, Android and Apple Watch apps.

Low-Cost. At many traditional brokerages, if you wanted to invest in social networks, you could end up spending a lot of money on commissions by purchasing stocks in a variety of companies such as Facebook, Twitter, Yelp and LinkedIn, one by one. With Motif’s trading platform you can purchase up to 30 stocks or ETFs simultaneously for just $9.95. Active investors know that managing investment fees is important to your performance and ability to grow your wealth over time.

Invest In The Future, Not In The Past

At Motif Investing, we offer over 150 professionally built motifs reflecting six thematic investing strategies:

• Sectors
• Income Generation
• Trading Philosophies
• Global Opportunities
• Values-Based
• Asset Allocation

Our team of investment professionals uses insights and trends from around the world such as globalization, resource scarcity, disruptive technologies, and changing consumer preferences and distills them into motifs containing 30 stocks or ETFs. The result is unique investment options for Motif investors. Explore our catalog.

Curious about performance? Our pre-built professional motifs have achieved 16.3 percent average annualized returns since their creation.† You can trade a professional motif as-is, modify it, or turn to our community – where investors have built more than 180,000 motifs – for inspiring ideas to inform your own investment themes.

Get started with Motif Investing today

†Average annual return based on averaging the returns of 113 equity motifs from January 1, 2012 through July 31, 2015 and rounded to the nearest tenth of a percent. This data is based on past performance and is for illustrative purposes only. The results depicted are not intended to be representative of actual results or performance an investor should expect to achieve. The return is calculated by annualizing returns for each individual motif and then equally averaging them across motifs. The calculation includes 113 professionally built stock-based motifs from their creation date through July 31, 2015, and excludes recently created motifs asset allocation and customized motifs. The return calculation does take into consideration rebalancing of securities within each motif according to a motif’s rebalancing schedule. These returns do not include transaction fees, commissions, or other charges, or dividends.

Standard pricing: $9.95 total commission per motif transaction, or pay $4.95 per stock for individual transactions within a motif. Other fees may apply. For details on fees and commissions, please click here.

Performance returns, including 1-month Return/Return Since Inception/1-year returns indicates the performance of this particular motif over that stated period of time as of the date provided. Performance is quoted for informational purposes only, however, there is no guarantee those returns will continue. See how we calculate returns. 

  1. Berube, Vincent, Sacha Ghai, Jonathan Tetrault, “From Indexes To Insights: The Rise Of Thematic Investing,” McKinsey & Company, December 2014.
  2. Berube, Vincent, Sacha Ghai, Jonathan Tetrault, “From Indexes To Insights: The Rise Of Thematic Investing,” McKinsey & Company, December 2014.
  3. Ibid.
  1. Brian
    27 Nov at 10:46 am

    Over 16 percent returns is great. Now I’m curious to go check how much I’ve made this year. I don’t think I’ve done nearly that well. Could be time a good time for me to tweak my allocations. Thanks for the reminder.

  2. Kevin
    7 Dec at 3:16 am

    I like thematic investing. Motifs are such an easy way to invest in ideas. You guys think of so many I couldn’t come up with on my own.