What is Thematic Investing & how it works

We live in an evolutionary world where everything changes with time. The stock markets in India has evolved from equity to derivatives to mutual funds and ETFs. Thematic investing is the next step of this evolution. It provides even laymen an opportunity to invest their hard-earned money in the most effective way.

Thematic Investing is a more efficient alternative to mutual fund investing.

Ideology of Thematic Investing: We live our lives based on our understanding of it. Our geography, education, profession and habits determine how we go about ourselves. Even when it comes to money, we generally like to invest in something that resonates with our ideas and understanding. Thematic Investing is a platform that helps you do just that in a completely hassle-free way. It is built to empower you to invest professionally based on your individual thinking process instead of having to your own research or build your own portfolio from scratch.

For example, if you think that renewable energy is the way of the future and foresee that it will replace fossil fuels someday, you can invest in a theme that is designed specifically with that view. So, you can save your valuable time & energy to do other things instead of being burdened with cumbersome and high level research work that is required to manually build the portfolio yourself. In effect, you can focus on your ideas and let us focus on the stocks.

Decision-making framework in investing is based on ideas, not facts alone.

How Thematic Investing works:

Explore 100+ ideas – We have over 100 different kinds of themes which are built based on innovative concepts and ideas which are shaping the world around us. You can choose any theme which suits your conviction.

Categories – Each theme put into separate categories so you can sort them based on your preferences. Categories allow you to sift through the wide variety in the shortest amount of time. For example, if you’re looking to invest in themes based on government policies, you can instantly filter them with one click.

Make the decision – Read about the themes you like, compare it to others, benchmark it against other asset classes like equity, gold and fixed income to know how it has done in the past and proceed to configure it according to your preferences.

Manage weights – By default, we recommend that clients buy an equi-weighted version of the theme so that risk & returns are properly balanced. However, based on your risk appetite, you can either choose an aggressive version or the safe version. The weights are fully customizable. You can take full charge of the allocation to manage risk and return in a way that makes you most comfortable.

Rebalance – Since the performance of companies and markets fluctuate from time to time based on underlying conditions, it is always wise to constantly keep your investment updated. After you invest in a theme, the performance of the stocks within the theme are being tracked on an ongoing basis. When it makes sense to rebalance (Sell some existing stocks and/or buy others), you will be notified so that you can make the necessary changes through the platform with just a few clicks. The idea is to make sure that the portfolio of stocks always embodies the underlying idea behind it. Although we cannot put a finger on an accurate time-frame, typically it should happen per quarter. Since the stock markets are dynamic, each rebalancing interval can be different.

What is a theme – A theme is a ready-made idea based portfolio of stocks. It is designed keeping in mind the underlying idea or investment rationale behind it. The stocks within a theme are chosen after carefully curating and shortlisting them in a series of steps to identify the most suitable ones. The stocks within a theme are subject to change from time to time. Investors will receive notifications to update themes on an ongoing basis.

All great investments, begin with an idea.

How thematic investing is different from mutual funds:

Portfolio structure – Mutual funds are market weighted. What this means is that they put more money in the larger companies and not necessarily in the ones which have higher potential. It prevents them from capitalizing on large opportunities as they are bound to invest smaller amounts in them. In comparison, themes are equi-weighted which means that you get an equivalent exposure to each stock in the portfolio regardless of the market capitalization of each company. This approach gives investors the opportunity to make larger profits.

Diversification – Most mutual funds are over-diversified which results in a mediocre return. A typical mutual fund has investments in over 50 stocks. This is not the upper limit but an average. If you want see the holdings of individual funds yourself, click here. In comparison, themes have anywhere between 2 to 20 stocks which are all based on a specific sector, trend or idea. This gives you a concentrated exposure which is required to make higher returns in the stock markets.

Returns – Mutual funds are structured in a way that they have a very high beta correlation to the benchmark indices (NSE, BSE). This means that their performance is highly dependent on the performance of these indices as they track the broader market very closely. On the contrary, themes are built to reflect ideas, sectors and trends hence they do not necessarily track the performance of Nifty or Sensex. Thematic investing empowers you to go beyond the traditional investment methodologies and make outsized returns if your ideas come to fruition.

Decision-making process – Investing in a mutual fund can be confusing due to the sheer number of schemes available in the market. In 2016, SEBI asked MFs to reduce the number of schemes. Most of the MF portfolios are similar to each other which adds to the dilemma to both, the advisor and investor. In contrast, the decision-making process via thematic investing is very interesting, clearly differentiated and fast.

Customization – Thematic Investing allows you to fully customize your equity portfolio. On our platform, you can choose from 3 different variants (Equi-weight, Max return & Low risk) for each theme. You can also remove or change the weights as per your preferences. Mutual fund investing is rigid & the investor cannot make any changes to the portfolio whatsoever.

Education – When you invest in stock markets through Thematic Investing, you can learn a lot about the world around you in the process. It is interactive where you get to read curated information and facts our platform. You can develop useful knowledge along the way. We also deliver useful content on Brainstorm. Whereas, if you invest in a mutual fund, the entire process is opaque so you feel disconnected from your investments.

Fees – Typically, a mutual fund charges fees of up to 2.5% of your total investment per year. Investing in or rebalancing a theme will cost you a flat fee of ₹100/- only + brokerage charges. (If you consider an investment of ₹100,000, you will end up paying ₹2,500 per year to a mutual fund whereas the charges to invest in themes could be as little as ₹100)

Futuristic – Mutual funds have been around for ages. Thematic Investing is a rising trend and has the potential to be the first preference for investing in the stock markets. You can read this Mckinsey report on thematic investing report by for more information.

Explore 100+ unique themes using our Thematic Investing platform and invest in the most efficient & hassle-free way. For more clarity, read related FAQs.

Tejas Khoday

Tejas Khoday

Tejas is the Co-Founder & CEO @ www.fyers.in, the youngest team to get NSE’s broker license. FYERS was started as a mission to enhance the terrain for traders and investors in India. He previously worked at Zerodha, Futures First & has been a professional trader for several years.

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Showing 44 comments
  • Manish
    Reply

    I am new to market , how this thematic investment ll helpful to me?

  • Vijay Reddy
    Reply

    How I ll get more return than mutual fund using thematic investment.

  • Rajshekar
    Reply

    Hi,
    Just saw your blog, it seems awesome and interesting.
    Is it possible for me to compare a particular theme with other themes mentioned in thematic other than asset classes like equity, gold and fixed income?

  • Majeet kumar
    Reply

    How much time shall I investment in one them?

  • Bhavesh patel
    Reply

    I want more return than mutual fund, ll you suggest any specific thems to invest.

  • Sagar
    Reply

    Dear Tejas,
    I Went through this portal, it feels new and innovative.
    So Fyers is the first company to come up with this investments in INDIA?

  • Sunny
    Reply

    Can i expect a guaranteed returns in this investment?

  • Narendra
    Reply

    How much money is required to buy all the themes mentioned in the thematic investing?

  • Puneeth
    Reply

    Hi Sir,
    I’ve just gone through the thematic investments, can you tell me on what basis or how did you choose the scripts on particular theme.

  • Yuvaraj
    Reply

    What make Thematic Investment better than other PMS?

  • Rajnish
    Reply

    Your sugar theme has 5 stocks in it and is valued at Rs 1200. So if I buy one and sell, I will pay brokerage of Rs 200 + DP charge of 5 x 20 = Rs 100. Total cost of Rs 300 or almost 25 % cost?

  • SAROJ kumar Singh
    Reply

    Dear sir.
    How to invest in thematic fund. What are the requirements for investing? I am having account in FYERS.

  • Ganeshkrishnakumar
    Reply

    I was an investor 6 years back and got hurt due to some reasons financially ,now I wish to trade again through fyers ,how to start with ???

  • Darpan
    Reply

    What is the minimum amount per month I should kept aside for Thematic Investing??

  • sourav
    Reply

    Hii…;Tejas

    I am a student working parttime job if I want invest 1000monthly on mutual fund so is it profitable or loss..in mutual fund…?

  • Abhishek patel
    Reply

    I don’t understand much as i am new in this field. Just let me know where should i go for this thematic investment?

  • Debarshi Ganguly
    Reply

    I am 40 years and new to any kind of trading, how do I start? Is there anyway that I be guided into trading?

  • Sharma trader
    Reply

    Awesome platform sir Ji.. Award winning category

  • Suresh Menon
    Reply

    Dear Mr Tejas,
    I have never dreamt of trading as profession, but circumstances forced me to stay indoors, and earn a living. I am 48 years of age and need your help & guidance in moving forward. Please guide me on, starting work with FYERS. What is the minimum investment required to have a safe and confident start. What is the minimum holding period, of each stock. I am new to this trade, & have decided to learn on the move. Please guide me

  • SANCHIT
    Reply

    Hi Tejas ,

    I went to your website , your idea is pretty interesting for investing , but what i want to complain is the customer executives you have doesn’t even have idea about you company offerings , they are just doing the time pass , they don’t even know that which scheme offers tax benefit which doesn’t .
    Please keep a track on them , as i got irritated with their poor knowledge .

    best of luck for future .

    Regards ,
    Sanchit

  • Vikas_Maratha
    Reply

    Impressive platform by Fyers. What are the charges?

  • Gagan Manju
    Reply

    How can I shift my holdings to Fyers from my small case?

  • Agnihotri
    Reply

    You need to do more marketing for this.. mutual funds did too much marketing and that is the reason it is so successful. All the best to fyers team and best regards.

  • Tejas Khoday
    Reply

    In every sense of the word. It is designed in a way that it is helpful for beginners & experts. Give it a shot, you’ll figure it out in a while. The problem that newbies have is that they don’t know where to start from (stocks can and do seem complex until you get used to them). With thematic investing, you can bypass these difficulties and invest in ready-made portfolios which are built on some intelligent ideas.

  • Tejas Khoday
    Reply

    A mutual fund by the very structure of their portfolio seek to mimic the index and beat it by a few percentage points. Thematic is the opposite of that. Themes/portfolios are concentrated on ideas. Hence they are concentrated and are geared to give you a great advantage if your ideas come to fruition.

  • Tejas Khoday
    Reply

    Hi Rajshekar, thanks. Yes of course. All you need to do is sort the themes on the Explore page based on returns by clicking on 1MO/1YR returns. You can also sort them based on volatility, short-term trend and risk-adjusted return (sharpe ratio).

  • Tejas Khoday
    Reply

    There are no time limits. If you wish, for the rest of your life or even intraday. Its really up to you. We suggest you stay invested as long as you have conviction in the themes.

  • Tejas Khoday
    Reply

    On average, our themes have delivered 18.8% whereas the average returns of equity diversified mutual funds is around 8.8%. That’s more than double. I encourage you to look around. But I must alert you, that concentrated portfolios do contain higher risk so it is wise to buy a few instead of just one.

  • Tejas Khoday
    Reply

    Sagar, thanks. Fyers is the first stock broker to come up with this in India. Yes..

  • Tejas Khoday
    Reply

    You can’t expect guaranteed return with even a fixed deposit or government bonds. Such a thing does not exist.

  • Tejas Khoday
    Reply

    Each theme has a minimum investment amount based on the value and number of shares within it. The value of themes vary in real-time. Right now, the smallest theme is around ₹900 or so. To buy all the themes with minimum amounts, well you’d have to check that out.

  • Tejas Khoday
    Reply

    Puneeth, the stocks are screened by our in-house proprietary algorithms. They go through a thorough filtering process before they are finally shortlisted. Themes are constructed with the intent to reflect the underlying idea/intent behind it. So stocks are allocated accordingly.

  • Tejas Khoday
    Reply

    Well there is a very vast difference between PMS and Thematic Investing:
    1. PMS requires a minimum investment of ₹25 lacs. Hence, it is not feasible for most people. On thematic, you can start with as little as ₹900.
    2. PMS charges clients up to 2.5% of total investment per year + performance fees. The charges on thematic platform is a flat ₹100 per theme.
    3. PMS is completely passive whereas thematic investing is semi-passive and more interactive.
    4. PMS can have other conditions such as lock-ins, exit loads etc. whereas thematic investing does not have such restrictions.

  • Tejas Khoday
    Reply

    Well to derive maximum value out of Thematic investing, it is best to invest a larger amount. Please keep in mind that it is a flat ₹100 only. If you happen to invest say 1 lac, the percentage calculation that you are referring to would be negligible.

  • Tejas Khoday
    Reply

    Saroj, if you already have an account, all you need to do is sign in and buy the themes right away by clicking “Execute”. If you need assistance, call our support team @ 080-46251111 to help you with it.

  • Tejas Khoday
    Reply

    Hi Ganesh, good to see you’re back with high spirits. Please leave your details so one of our team members can call you back: https://www.fyers.in/join-us/

  • Tejas Khoday
    Reply

    There are no minimum limits. You can keep any amount you want. It’s really upto you Darpan.

  • Tejas Khoday
    Reply

    It can be but the ideology of MF investing is get long-term outperformance over the equity index. More often than not, SIPs do not give you meaningful profits in the short-term.

  • Tejas Khoday
    Reply

    Hey Abhishek, visit: thematic.fyers.in

  • Tejas Khoday
    Reply

    Hi Mr. Ganguly, You’ll have to open a trading and demat account with us before you can buy these themes. It’s a very simple process. Request you to drop your details here: https://www.fyers.in/join-us/

  • Tejas Khoday
    Reply

    Thx Sharma Ji.:-) Tell your friends too.

  • Tejas Khoday
    Reply

    Hi Mr. Suresh,
    The minimum investment amount depends on a few things:
    1. How much risk you can take (Higher risk = higher returns etc.)
    2. What is that minimum amount you need per month to satisfactorily trade/invest?

    Once you know this, you can write to us. Although I don’t know your circumstances as yet, we can guide you. I write a lot on quora. See if that helps.
    https://www.quora.com/profile/Tejas-Khoday. You can also read other posts on our blog, Brainstorm. Going to write more often going forward.

  • Tejas Khoday
    Reply

    Oops apologise for that, you probably spoke to a new intern. Will do thanks for letting me know. By the way, since you’re investing in stocks directly through these themes, the standard taxation on equity investments is applicable (LTCG is tax free). These are not tax deductible like ELSS just in case you are not already aware.

    Have a great weekend Sanchit.

  • Tejas Khoday
    Reply

    Since Small case is tied up with Zerodha, your holdings are effectively stored in your demat account there. You can either use a delivery instruction slip or the online process to shift your holdings. For simplicity’s sake: selling your holdings and starting afresh makes sense too. Leave a message here if you need further help: https://www.fyers.in/join-us/

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