- 1 THEME INVESTING
Traditional Diversification concepts no longer hold true for Contemporary investing. Over the period of time investing perspective has changed multi-fold and now the concept of theme based investing has also been given very higher importance. Even Indian National Stock Exchange the option of diversified investing through Exchange Traded Funds was limited to Nifty 50. Gradually they had to introduce various other options such as theme based ETF managed by Goldman Sachs Asset Management by Name GS Junior BeES under the Symbol JUNIORBEES.
WHAT IS THEMATIC INVESTING?
I love the concept that is explained by NSE on ETF
ETFs are just what their name implies: baskets of securities that are traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day like any stock. Most ETFs charge lower annual expenses than index mutual funds. However, as with stocks, one must pay a brokerage to buy and sell ETF units, which can be a significant drawback for those who trade frequently or invest regular sums of money. They first came into existence in the USA in 1993. It took several years for them to attract public interest. But once they did, the volumes took off with a vengeance.
Nifty 50 Fact Sheet
|CEMENT & CEMENT PRODUCTS||3.25|
|MEDIA & ENTERTAINMENT||0.83|
Investing in any Idea, Concept, Sector or Industry can fall under theme based investing. Theme based investing is done professionally instead of individual spending time in doing due diligence with limited resources.
Very simple example for this is with the growth that India as a country is expecting in years to come will definitely give a huge boost to the Financial Sector the main reason being that still majority of the Indian population are still not served by professional financial products. So instead of doing a cumbersome process with limited resources. You can focus on the idea and invest in stock based on the theme. Theme based investing both are given priority idea as well as facts.
WHAT ARE THE THEME AVAILABLE IN MARKET?
EXCHANGE TRADED FUNDS
In the Year 2001 there was only one ETF managed by Goldman Sachs Asset Management with the name of GS Nifty BeES under the symbol NIFTYBEES . Next ETF came with a gap of 2 years in the year 2003 managed by ICICI Prudential AMC under the name ICICI SENSEX Prudential Exchange Traded Fund with the symbol ISENSEX.
Now the demand for the ETF has increased multi fold times and this has lead to more number of ETF to be introduced. Kindly find the list below of the ETF traded in NSE.
|List of Equity ETFs listed on NSE|
|Issuer Name||Name||Symbol||Underlying||Launch Date|
|Edelweiss AMC||Edelweiss Exchange Traded Scheme – Nifty||NIFTYEES||Nifty 50 Index||08-May-2015|
|Goldman Sachs Asset Management||GS Nifty BeES||NIFTYBEES||Nifty 50 Index||28-Dec-2001|
|ICICI Prudential AMC||ICICI Prudential Nifty ETF||INIFTY||Nifty 50 Index||20-Mar-2013|
|Kotak AMC||Kotak Nifty ETF||KOTAKNIFTY||Nifty 50 Index||02-Feb-2010|
|Motilal Oswal AMC||MOSt Shares M50||M50||Nifty 50 Index||28-Jul-2010|
|Quantum AMC||Quantum Index Fund – Growth||QNIFTY||Nifty 50 Index||10-Jul-2008|
|Reliance AMC||R*Shares Nifty ETF||RELNIFTY||Nifty 50 Index||22-Nov-2013|
|Religare AMC||Religare Invesco Nifty ETF||RELGRNIFTY||Nifty 50 Index||13-Jun-2011|
|SBI AMC||SBI ETF Nifty||SETFNIFTY||Nifty 50 Index||23-Jul-2015|
|UTI AMC||UTI Nifty ETF||UTINIFTETF||Nifty 50 Index||03-Sep-2015|
|Birla Sun Life AMC||Birla Sun Life Nifty ETF||BSLNIFTY||Nifty 50 Index||21-Jul-2011|
|ICICI Prudential AMC||ICICI Prudential CNX 100 ETF||ICNX100||Nifty 100||20-Aug-2013|
|Reliance AMC||R*Shares CNX 100 ETF||RELCNX100||Nifty 100||22-Mar-2013|
|Goldman Sachs Asset Management||GS Bank BeES||BANKBEES||Nifty Bank||27-May-2004|
|Kotak AMC||Kotak Banking ETF||KOTAKBKETF||Nifty Bank||04-Dec-2014|
|Reliance AMC||R*Shares Banking ETF||RELBANK||Nifty Bank||24-Jun-2008|
|SBI AMC||SBI ETF Banking||SETFBANK||Nifty Bank||20-Mar-2015|
|Goldman Sachs Asset Management||CPSE ETF||CPSEETF||Nifty CPSE Index||28-Mar-2014|
|Reliance AMC||R*Shares Dividend Opportunities ETF||RELDIVOPP||Nifty Dividend Opportunities 50||15-Apr-2014|
|Reliance AMC||R*Shares Consumption ETF||RELCONS||Nifty India Consumption||10-Apr-2014|
|Goldman Sachs Asset Management||GS Infra BeES||INFRABEES||Nifty Infrastructure||29-Sep-2010|
|Motilal Oswal AMC||MOSt Shares M100||M100||Nifty Midcap 100||31-Jan-2011|
|Goldman Sachs Asset Management||GS Junior BeES||JUNIORBEES||Nifty Next 50||21-Feb-2003|
|SBI AMC||SBI ETF Nifty Junior||SETFNIFJR||Nifty Next 50||20-Mar-2015|
|Goldman Sachs Asset Management||GS PSU Bank BeES||PSUBNKBEES||Nifty PSU BANK||25-Oct-2007|
|Kotak AMC||Kotak PSU Bank ETF||KOTAKPSUBK||Nifty PSU BANK||08-Nov-2007|
|Goldman Sachs Asset Management||GS Shariah BeES||SHARIABEES||Nifty50 Shariah Index||18-Mar-2009|
|Reliance AMC||R*Shares NV20 ETF||RELNV20||Nifty50 Value 20 Index||18-Jun-2015|
|ICICI Prudential AMC||ICICI SENSEX Prudential Exchange Traded Fund||ISENSEX||S&P BSE Sensex||10-Jan-2003|
|UTI AMC||UTI Sensex ETF||UTISENSETF||S&P BSE Sensex||03-Sep-2015|
Now the theme based investing is not limited to ETF alone. This can be found with much more options in Mutual Funds.
The mutual Funds offerings are even more than the ETF but they can be broadly classified as below.
- Equity Funds
- Balanced Funds
- Debt Funds
- Funds of Funds
With this the entire Mutual Investing is Broadly Classified.
THEMATIC PORTFOLIO BY STOCK BROKERS
This is the most contemporary way of investing in Stock. As of now every few stock brokers such options. It is relatively very new in the market. Its wide acceptance of stock broker providing thematic stock investing options is yet to cover a large chunk of population. Conflict of Interest is an very important point that should not be ruled out. Nevertheless thematic options that are offered by such brokers are standing apart since the biggies of ETF and Mutual Funds are not able to attend to.
I personally Love the concept of Thematic Portfolio by a Contemporary Stock Broker such as Zerodha. New concept launches by Zerodha is Smallcase.
IGNORING THEME BASED INVESTING OPPORTUNITIES?
In Emerging Markets especially with high growth rate certain theme might have much more importance than others. Traditional way of investing would definitely miss out on that because of limitations in coverage of all aspects. All the industries that have grown into a large industry could have started as theme at some point in time. When one is very focused and confident on the idea being the next growth contributor can be done through theme based investing.
Contemporary thematic investing opportunities are quite different and they can range from short term to medium term.
Some of the contemporary opportunities could be as mentioned below.
- GST Opportunities
- Smart Cities Opportunities
- Power Opportunity
- Valuation Based Opportunity
- Growth Based Opportunity
- New Technology Based Opportunities
- Government Initiative Based Opportunity (Defense)
- Low Bargain Opportunity
Now coming to the main question.
Micro theme based opportunities are the one which are mentioned above. These are not covered by Mutual Funds and ETF’s.
If you are an investor and your belong to Moderate Risk to High Risk. Rather if you are aggressive investor than it definitely must have. At times there are opportunity when the Macro theme may not perform as much as micro theme. At the same time macro theme might take around 20 years to mature. While the micro theme might be good opportunity for short term. One cannot ignore the fact that at times some micro themes could be a major macro theme in 2 decades. Classic example for this is Information Technology Sector which has given out performance in last 2 decades.
IS IT EXPENSIVE?
Coming to the most important aspect is it expensive?
Simple answer to this is NO.
Historically charges for the ETF are low. Mutual funds are getting into Direct Selling. One can always buy direct funds. Perhaps expense ratio is definitely a concern which is usually low with index funds where churning is very low and it is high for themes where churning is very high. Charges for theme based investing with discount brokers are considerably low. You can find the charges list of small case here.
REASONABLE AMOUNT ALLOCATION FOR THEME BASED INVESTING
Currently Goal based Investing is what most financial advisers recommend. Another popular method is 100 minus age. For example if your age is 30 subtract that from 100 which gives you 70. So invest 70% in equity and 30% in debt.
Perhaps this is a blind method.
For allocation the best person should be a Financial Adviser.
Nevertheless one can always lay emphasis on Theme based Investing. More importantly it is also how much confident you are on the idea. This is more important in investing than anything else.
There are lot more creative and sustainable ways to investment. If you just try and treat this as important aspect I am sure you would find a much innovative way to get a positive alpha return even in the down market.
If you know any other way to invest in theme from that that I didn’t mention here, please share it with us in the comments section.
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