Thematic ETFs: What they are and what investors need to know
ETFs can provide your portfolio with diversification
BlackRock's Gargi Pal Chaudhuri: ETFs can help investors navigate volatility, stay invested
BlackRock head of iShares investment strategy Gargi Pal Chaudhuri discusses the value of ETFs and how they help investors stay invested on 'The Claman Countdown.'
Exchange-traded funds, or ETFs, can provide your portfolio with diversification in today’s challenging economic times.
"ETFs offer investors access to dozens of securities in a simple single ticker solution," said Jay Jacobs, BlackRock's U.S. head of thematics and active equity ETFs. "By targeting a basket of companies, rather than one or just a few, ETFs diversify risk across a wide range of companies and geographies."
Jacobs told FOX Business this can prove especially valuable during challenging economic and market environments where concentrated investments could potentially capture greater downside.
"At the same time, ETFs offer the ability to target narrow investment areas which could still benefit during challenging times, while again, still offering the benefits of diversification," he explained.
Such concentrated investments, for example, are thematic ETFs that target groups of companies that are at the forefront of innovations like robotics, cybersecurity, or clean energy, said Jacobs.
In this image provided by Portland General Electric, windmills and solar panels line a renewable energy facility in Lexington, Ore., on this May 24, 2022. (Sarah Hamaker/Portland General Electric via AP) (Sarah Hamaker/Portland General Electric via AP / AP Images)
To that end, BlackRock recently released its 2023 thematic outlook that looks at themes within tech, health care and growth sectors, and provides insight to investors to play the themes using ETFs.
"We assembled our 2023 Thematic Outlook to help investors navigate this opportunity, outlining why we think investment areas like clean energy, electric vehicles, infrastructure, genomics, immunology, neuroscience, robotics, and cybersecurity have strong tailwinds for the year ahead," Jacobs said.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BLK | BLACKROCK INC. | 1,023.79 | -4.37 | -0.43% |
Thematic ETFs can be a way to dip your toe into the market
Roxanna Islam, VettaFi's associate director of research, said investors can examine their current sector preferences and look for larger macro themes or key megatrends among those sectors.
"For example, if an investor likes the auto industry and realizes that regulations are shifting the industry toward clean energy and electric vehicles, they might invest in a future mobility or electric vehicle ETF instead of an auto or transportation ETF," said Islam. "The same applies to the health care sector and biotechnology ETFs."
Alternatively, if investors have a few stocks they prefer that share similar growth drivers, they can invest in a thematic ETF instead of buying individual stocks, Islam said.
A customer in a pharmacy reads the label of a medicine bottle. (iStock) (iStock / iStock)
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What are trends for thematic ETFs for 2023?
When asked what the trends for 2023 are regarding thematic ETFs, Islam said she believes investments related to electric vehicles and e-commerce are among the market sectors that will have increased interest.
"I think electric/future vehicle, battery power, and clean energy ETFs will continue to grow in popularity as investors realize that regulations are shifting the auto industry toward clean energy and electric vehicles," Islam said. "I also think e-commerce will see more interest as investors realize that e-commerce isn’t just a pandemic-era story, and technology will continue to influence both the way consumers shop and the way that retailers build their supply chains."