Top 3 Limitations of Thematic Investing

Smart Beta is one of the trendiest term these days fetching the attention of people from all the spheres of life. Be it the regular dividend paying company or a normal Index Company all are diversifying in terms of investment. This diversification is leading companies and individuals towards the Thematic Investing. However, with every rose comes a thorn. Similarly, thematic investment also has its own set of advantages and disadvantages to offer. Advantages are many but paying heed to the pitfalls is equally important. Here are the top 3 limitations of Thematic Investing.

Long run or short run

Thematic funds are known to focus on the trends that are in itself negative. The foremost problem that relates to this type of investing is knowing whether it is going to reap benefits in the short run only or also in the long run. The investment trends must have something worthy to offer in the long run. Also, it is important to invest in the lasting theme on time if you wish to have great results.

Proportional factors

There are a lot of factors that impact the success of thematic investment. These are the factors like the alterations in government policy and the advancement in technology. Some of the themes result in distillation of the things that the investment bankers are selling.

Appropriate securities

Another problem associated with thematic investing is choosing the appropriate securities for the trend in question. This is not an easy task. However, if you tend to do this appropriately then you tend to get great results. Though many of the investors have an inclination towards the passive strategies, yet there are many who are stepping away from this.

All in all, these are the top 3 limitations of Thematic Investing. Prior to making a decision as per to go in for this type of an investment or not it becomes pivotal to pay attention towards each and every aspect of the same. Knowing the pitfalls of a certain thing makes taking decision a bit easier for you. such is the case with thematic investing.

Source : https://sites.google.com/site/agriculturetrindex/top-3-limitations-of-thematic-investing