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Investors today are looking for more than just average market returns — they’re seeking opportunities to invest in businesses and industries that will shape the future and deliver outsized growth. Thematic investing offers a way to align your portfolio with emerging global trends, from artificial intelligence (AI) to climate change solutions.
With the flexibility of both active and passive management styles, thematic investing provides a unique opportunity for investors to ride long-term trends while managing risks in a dynamic market environment.
But how does it work, and is it the right fit for your long-term investment strategy?
What is thematic investing?
Thematic investing is a strategy focusing on investing in long-term global trends rather than specific sectors or companies. It allows investors to capitalize on themes like technology innovation, demographic shifts or environmental sustainability.
By identifying and investing in transformative trends, thematic investing can target sectors and industries poised for growth over the coming decades.(1) This strategy is particularly helpful for those looking to align their portfolios with their personal beliefs — such as environmental sustainability or ethical innovation — or capitalize on structural changes in the global economy.
Unlike traditional stock picking, thematic investing emphasizes a broad, forward-looking approach, targeting the sectors and industries set to grow over time. It also differs from sector investing, which focuses on a specific industry, by investing across various sectors contributing to a larger, overarching theme.(2)
For example, a thematic fund focused on AI could include companies from multiple industries, such as tech, healthcare and automotive, that are leveraging AI to drive innovation. This ability to cross industries allows investors to diversify their portfolios while still staying focused on high-potential themes.
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How does thematic investing work?
Thematic investing works by identifying broad, impactful trends expected to shape the global economy over the long term.(3)
Investors select themes that align with these trends — such as AI, clean energy or cybersecurity — and invest in a diversified portfolio of companies or assets tied to those themes. This strategy allows them to focus on long-term growth potential rather than short-term market volatility. Integrating thematic investing into your portfolio requires thoughtful asset allocation to ensure it aligns with your overall investment strategy and risk tolerance.
The process typically involves investing in exchange-traded funds (ETFs) or mutual funds that are built around specific themes. These funds provide exposure to a range of companies operating within the theme, minimizing the risk of investing in individual stocks while allowing investors to benefit from the collective performance of a thematic portfolio.
Thematic investing is best suited for long-term strategies, as many of these trends can take years or even decades to fully develop. For example, AI and renewable energy are expected to continue evolving for years, providing opportunities for sustained growth.(4), (5)
Investors should be prepared for short-term volatility and ensure they believe in the long-term viability of the themes they are investing in. Since thematic investing often cuts across multiple stock sectors and geographies, it provides a broader exposure to global shifts compared to more traditional investment strategies that focus on specific industries or countries.
Thematic investing examples
Thematic investing spans a wide array of global trends, from cutting-edge technology to sustainability and social change. Investors can focus on themes that resonate with their interests and long-term beliefs. Below are some popular themes driving growth in thematic investing today.
Artificial intelligence. As companies increasingly adopt AI to streamline operations, improve decision-making and innovate in product development, this theme has seen explosive growth.(6) Investors in AI-focused funds gain exposure to companies leading in AI development, such as those specializing in machine learning, robotics and automation.
Clean energy. Investments in solar, wind and other renewable energy technologies are growing rapidly, driven by government policies and the urgent need to combat climate change.(7) Companies that develop or support clean energy infrastructure are key targets for thematic investing, making this a compelling option for investors focused on environmental impact.
Cybersecurity. With the rise of cyber threats and data breaches, companies providing cybersecurity solutions are in high demand. Investing in this theme offers exposure to firms that create software, hardware and services designed to protect digital assets and infrastructure.
Healthcare innovation. This theme focuses on companies developing breakthrough therapies, advanced medical devices and new technologies like telemedicine and gene therapy. The healthcare sector’s continuous evolution presents opportunities for investors looking to capitalize on both cutting-edge science and increasing global demand for better health solutions.
Robotics and automation. The rise of robotics and automation is reshaping industries from manufacturing to logistics. This theme includes investments in companies that create robots, automated systems and technologies designed to increase efficiency and reduce costs in industrial processes.
Fintech. Fintech is revolutionizing how financial services are delivered, with innovations in mobile payments, blockchain and peer-to-peer lending reshaping traditional banking systems. This theme includes companies like Block (SQ), PayPal (PYPL) and Visa (V), which are driving the shift toward cashless transactions and decentralized financial systems.
Sustainable agriculture. Sustainable agriculture focuses on innovations in food production that meet global demand while minimizing environmental impact. This theme includes companies developing plant-based proteins, precision farming technologies and vertical farming solutions. As climate change and population growth increase pressure on global food systems, sustainable agriculture is emerging as a key theme for investors.(8) Companies like Beyond Meat (BYND), John Deere (DE), and AppHarvest (APPH) are leading the charge in transforming the agricultural landscape.
5G technology. 5G technology is set to revolutionize the way we communicate, with ultra-fast internet speeds, enhanced connectivity and the ability to support more connected devices than ever before. As 5G networks roll out globally, companies involved in 5G infrastructure, like Qualcomm (QCOM), Ericsson (ERIC) and Verizon (V), are positioned for significant growth. This theme appeals to investors looking to tap into the next generation of telecommunications and the digital economy.
Thematic investing opportunities
Many brokers offer thematic investing options, making it easier for investors to access portfolios aligned with specific trends.
From specialized platforms to traditional brokers, there are a variety of ways to engage with thematic investing. Below are a few popular options that offer a wide range of themes to choose from.
Opto
Opto is a platform specifically designed for thematic investing, providing access to a variety of curated portfolios that focus on long-term global trends.
Opto offers portfolios in areas like disruptive technologies, green energy and healthcare innovation. What sets Opto apart is its focus on providing investors with data-driven insights and research to back up its thematic choices, allowing for more informed decision-making.
Opto’s thematic portfolios are designed for long-term growth, making them a strong option for investors who want to capitalize on emerging global trends without the hassle of stock picking.
Additionally, Opto’s easy-to-use platform allows investors to explore and track their chosen themes, offering detailed analytics and performance reports to ensure investors stay on top of their portfolios.
Schwab Investing Themes
Charles Schwab offers a comprehensive thematic investing experience through its selection of specialized ETFs and mutual funds.
Specific themes available include clean energy, robotics and AI, genomics and biotechnology, fintech innovation and sustainable agriculture. Schwab’s platform is user-friendly and integrates seamlessly with its broader investment offerings, allowing investors to easily add thematic funds to their portfolios.
Schwab’s thematic funds are diversified, giving investors exposure to a wide range of companies within each theme. This approach minimizes risk while offering long-term growth potential, making it suitable for both novice and experienced investors.
Also providing robust educational resources and research tools, Charles Schwab allows investors to better understand the themes they are investing in and make informed decisions.
Fidelity Thematic Investing
Fidelity provides a range of thematic ETFs and mutual funds, focusing on trends like clean energy, future transportation, cloud computing and blockchain technology. Fidelity’s thematic funds are managed by industry experts, offering a hands-on approach to investing in emerging trends.
With its robust research and diverse portfolio options, Fidelity Investments allows investors to capitalize on global megatrends while balancing risk. The platform’s thematic funds are designed to offer broad exposure to these trends, making it easy for investors to align their portfolios with their long-term interests.
Fidelity’s low-cost fund options also make it a compelling choice for those looking to keep expenses down while gaining exposure to high-growth themes.
E*TRADE Thematic Investing
E*TRADE offers a variety of thematic investing opportunities through its platform, with options ranging from AI, 5G and healthcare innovations to renewable energy. E*TRADE provides easy access to thematic ETFs and mutual funds, allowing investors to diversify their portfolios with minimal effort.
What sets E*TRADE apart is its intuitive platform, making it easy for both beginner and experienced investors to navigate thematic investing. E*TRADE also provides educational resources that help investors understand the potential risks and rewards associated with each theme, enabling more informed investment decisions.
Additionally, E*TRADE’s integration with its broader suite of trading tools allows investors to monitor their thematic portfolios alongside other investments for a more holistic view of their financial goals.
Pros and cons of investing by theme
Thematic investing offers a unique way to align your portfolio with global trends but also comes with its own set of risks and rewards. Below are some key pros and cons to consider before diving in.
Pros
Focus on long-term growth. Thematic investing allows you to capitalize on long-term trends like AI and clean energy, offering growth potential over time as these themes evolve.
Diversification across sectors. Unlike sector-based investing, thematic investing provides exposure to multiple industries, reducing risk by spreading your investments across different markets and geographies.
Personal alignment. Thematic investing enables you to align your portfolio with your personal values and interests, such as investing in environmental sustainability or technological innovation.
Cons
High volatility. Many themes, especially emerging ones, can experience significant short-term fluctuations. This volatility might not suit investors with lower risk tolerance.
Over-concentration. Although thematic funds are diversified, they can still be concentrated in a few key industries, which could expose your portfolio to sector-specific risks.
Longer time horizon needed. Thematic investing is generally best suited for long-term investors. Those looking for quicker returns might find it challenging, as many themes take years to fully realize their growth potential.
Bottom line
Thematic investing provides a unique opportunity to align your portfolio with global trends that you believe will shape the future. While it requires a long-term view and understanding of potential risks, the growth potential can be significant. Consider exploring the best brokers that offer thematic investment options to diversify your portfolio and capitalize on emerging trends.
Frequently asked questions
What is the difference between impact investing and thematic investing?
Impact investing focuses on generating measurable social or environmental benefits alongside financial returns, such as investing in clean energy projects or social enterprises.
Thematic investing, on the other hand, centers on investing in broad economic trends like technological innovation or demographic shifts without necessarily prioritizing specific social or environmental outcomes.
How is thematic investing different from sector investing?
Sector investing targets specific industries, such as technology or healthcare, concentrating investments in companies within that sector. Thematic investing cuts across sectors, investing in companies tied to a particular trend, such as artificial intelligence or climate change, which may span multiple industries and regions.
What are the risks of thematic investing?
Thematic investing can be risky due to the potential for high volatility, as emerging themes may take years to develop fully. Additionally, over-concentration in specific trends or industries could expose your portfolio to sector-specific risks. Investors should have a long-term outlook and be prepared for short-term fluctuations.
Shane's career started with the US Department of Defense where he performed research for 8 years. He then studied philosophy and became fascinated by the ways in which technology and finance can consolidate to impact the world's socio-economic order. To date, he has written hundreds of articles with various insights into digital assets, trading, investing, and the ways in which technology can be used to further optimize the stock trading and settlement processes. His work has been featured in Yahoo Finance, Nasdaq, Bitcoin Magazine, Investing.com, Tokenist, and others. See full bio
Some of the best ways to invest and make money daily include buying stocks and ETFs, using a high-yield savings account and staking crypto.
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