Thematic and diversified investment via ETFs
Summary: ETFs offer an way to get exposure to a trading theme, geographical region or other submarkets through a single instrument. Below we demonstrate a fraction of the possibilities to focus or diversify your portfolio with ETFs.
ETFs are typically covering either specific asset classes, geographical regions, or investment themes, and the latter has really gained interest during the past years. As mentioned in this article, this typically comes at a low cost, compared to the cost of acquiring each of the instruments in the ETF individually.
Multiple providers are offering ETFs, such as Amundi, Ossiam, Invesco, iShares, Xtrackers, HSBC, Lyxor and WisdomTree. Below is an example of 10 thematic ETFs and 10 ETFs with different geographical exposure (some of them with specific focus on ESG). They have been selected only for illustrative purposes due to their different themes and should not be considered as any trade considerations. Only UCITS ETFs are shown, as these typically have a KIID document, meaning that they do not have the same trade restrictions as some of the larger US ETFs which cannot be traded in some jurisdictions, unless you have status as being a professional trader.
Examples of thematic ETFs with a variety of trading themes:
- INFR:xmil - iShares Global Infrastructure UCITS ETF
- INRG:xlon - iShares Global Clean Energy UCITS ETF
- WCBR:xmil - WisdomTree Cybersecurity UCITS ETF
- FSKY:xlon - First Trust Cloud Computing UCITS ETF
- FOOD:xmil - Rize Sustainable Future of Food UCITS ETF
- HEAL:xlon - iShares Healthcare Innovation UCITS ETF
- RBOT:xlon - iShares Automation & Robotics UCITS ETF
- TRVL:xmil - Lyxor STOXX Europe 600 Travel & Leisure UCITS ETF
- ESP0:xetr - Vaneck Vectors Video Gaming & eSports UCITS ETF
- LERN:xmil - Rize Education Tech & Digital Learning UCITS ETF
Examples of ETFs with different geographical exposure:
- XZW0:xetr - Xtrackers MSCI World ESG UCITS ETF
- XZEU:xetr - Xtrackers MSCI Europe ESG UCITS ETF
- SGAS:xetr - iShares MSCI USA ESG Screened UCITS ETF
- SGAJ:xetr - iShares MSCI Japan ESG Screened UCITS ETF
- ICHN:xams - iShares MSCI China UCITS ETF
- RUS:xpar - Lyxor MSCI Russia UCITS ETF
- AEEM:xpar - Amundi MSCI Emerging Markets UCITS ETF
- INR:xpar - Lyxor MSCI India UCITS ETF
- IRSA:xlon - iShares MSCI South Africa UCITS ETF
- IBC6:xetr - iShares MSCI Australia UCITS ETF
What to look out for when trading thematic ETFs?
Note that new ETFs in some time after their launch may have relatively low liquidity compared to established ETFs, so keep an eye out when trading those with a relatively large bid-ask spread. Read more on ETF liquidity here.
Some of the thematic ETFs are created with companies which are mostly is pure-plays within the theme, i.e. where a large parts of the company’s revenue is exposed to the theme. Other ETFs include companies if only a minor part of their revenue is associated with the ETF theme, e.g. for typical cloud computing ETFs which contain companies like Amazon, Alphabet etc. So the price movements in the ETF may be affected significantly by events which are not related to the overall ETF theme.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.