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Thematic Investing Ideas to Boost Your Portfolio Returns in Q2

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Thematic investing continues to increasingly gather investors’ attention. A Bloomberg Intelligence (BI) report also recently highlighted this investment genre’s growing popularity.

The report highlights that this kind of investing is witnessing growing popularity among retail and younger investors. Notably, thematic ETFs do not invest in an entire market or single sector but rather in concepts, themes or trends. They allow investors to park their money in innovative industries and technologies as well as smaller companies that traditional GICS sectors do not include, per the same BI report. 

The BI report also estimates that thematic ETFs ‘could become a $300 billion category in five years.’ The report also highlights the latest research from Brown Brothers Harriman among 382 advisers, institutions and fund managers, which demonstrates that about 80% aim to raise allocations to theme ETFs over the next year. 

In this regard, BI Senior ETF Analyst Eric Balchunas has said that “theme ETFs have taken in more money over the past three years than all other sector ETFs combined. The recent selloff showed their durability with minimal outflows. With USD170 billion they already exceed the assets of any single sector and are more than double the size of any outside technology.” 

Against this backdrop, let’s take a look at some of the themes that are currently trending in the investment world:

Clean Energy ETFs

Alternative energy includes any energy source that acts as a replacement of conventional and non-renewable fossil fuel. This space has been in the spotlight of late for many reasons. Increasingly, large corporations are making or promising investments to gain carbon-neutral status. Notably, favorable government initiatives and federal policies, which include tax incentives to encourage installation, have accelerated global market growth for clean energy in 2020. Moreover, despite turbulences arising from the coronavirus pandemic, both solar and wind energies have been dominating the global renewable space of late.

The space is expected to get stronger under the Joe Biden administration. Biden is expected to talk about the climate emergency on global platforms and ensure that the United States achieves a 100% clean energy economy and net-zero emissions, no later than 2050. Going on, Biden’s climate and environmental justice proposal calls for  federal investment of $1.7 trillion over the next 10 years, leveraging further private sector and state and local investments to stand at more than $5 trillion.

Thus, investors can consider the following ETFs -- iShares Global Clean Energy ETF (ICLN - Free Report) , Invesco Solar ETF (TAN - Free Report) , First Trust NASDAQ Clean Edge Green Energy ETF (QCLN) and ALPS Clean Energy ETF (ACES) (read: A Complete Guide to Clean Energy ETFs).

Digital Payments ETFs

Along with increased interest in online shopping, customers are resorting to digital payments to clear their bills. At the same time, merchants and utility providers are increasingly advocating the same. Highlighting the growing inclination toward digital payments, Jodie Kelley, CEO of Electronic Transactions Association, has said, “Over the past six to eight months, we’ve seen the use of cash decline even further, and that’s a trend I think that we’re going to see continue,” as stated in a CNBC article.

In such a scenario, investors can take a look at ETFMG Prime Mobile Payments ETF (IPAY - Free Report) , Tortoise Digital Payments Infrastructure ETF (TPAY) and Global X FinTech ETF (FINX) (read: ETFs to Ride the Bitcoin Rally on Rising Popularity).

Marijuana ETFs

The Biden administration is expected to decriminalize cannabis at a federal level in the United States. The House passed a bill in December to decriminalize and tax marijuana at the federal level but Senate Republicans hindered the success of the measure. The bill aims to decriminalize cannabis at the national level for the first time and exclude it from the list of federally-controlled substances and remove certain federal convictions. Now, with the Democrats controlling the U.S. Senate, it might get easier for the Biden administration to take steps toward decriminalizing marijuana.

Going on, vice-president Kamala Harris has always supported cannabis decriminalization. She is also the lead sponsor of the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act of 2019, which sought to end federal prohibition of cannabis, per a Reuters article. Thus, investors can consider The Cannabis ETF (THCX - Free Report) , ETFMG Alternative Harvest ETF (MJ), AdvisorShares Pure Cannabis ETF (YOLO) and Global X Cannabis ETF (POTX) (read: Top-Performing ETF Areas of Last Week).

AI, Robotics & Cyber Security

AI is fast changing the business landscape by expanding opportunities, driving revenues and enhancing efficiencies. It helps enhance almost everything, including advertising, healthcare, robotics, retail, video streaming, gaming and urban development.

We are living in an era largely dominated by AI applications and technological advancements. Amid the coronavirus crisis, demand for online services has increased, which in turn has led to the dominance of AI. Globally, the AI market is estimated to see a CAGR of 29%, rising from a worth of $42.8 billion in 2019 to $152.9 billion in 2023, according to an Analytics Insight article.

The robotics market is flooded with opportunities as robots are being used for jobs such as sanitizing hospitals, homes and workplaces along with monitoring, surveying, handling, and delivering food and medicines.

However, increasing adoption of these technologies is exposing businesses, governments and organizations to cyber risks. Given the severity of the situation, Cybersecurity Ventures expects the worldwide expenditure on cybersecurity to surpass $1 trillion cumulatively from 2017 through 2021. Per a Grand View Research report, the global cyber-security market is expected to reach a worth of $241.1 billion, at a CAGR of 11% from 2019 to 2025. Accordingly, our investors can consider Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report) , First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT), ROBO Global Robotics & Automation ETF (ROBO), iShares Robotics and Artificial Intelligence Multisector ETF (IRBO), First Trust NASDAQ CEA Cybersecurity ETF (CIBR - Free Report) and ETFMG Prime Cyber Security ETF (HACK) (read: 5 ETFs to Watch as Nvidia Tops Q4 Earnings, Guides Higher).

Cloud Computing ETFs

Amid the coronavirus pandemic,industries like cloud computing have been thriving with majority of people working from home. Even though vaccine rollout has begun globally, demand for cloud computing is set to stay robust even beyond the pandemic. In the wake of the pandemic, cloud technology adoption is projected to witness robust growth in sectors where the work-from-home initiatives are helping sustain business functions.

Gartner has reportedly projected end-user spending on public cloud computing to increase18.4% in 2021 globally to a total of $304.9 billion, up from an estimated $257.5 billion in 2020. Integration of cloud computing with AI, big data and IoT will help businesses touch new levels of success in innovation. Going by a Forrester’s Predictions 2021 report, cloud will power the way companies adapt to the “new, unstable normal” in 2021. The global public cloud infrastructure market is projected to expand 35% to $120 billion in 2021.

Thus, investors can consider First Trust Cloud Computing ETF (SKYY - Free Report) , Global X Cloud Computing ETF (CLOU - Free Report) and WisdomTree Cloud Computing ETF (WCLD) (read: Time to Buy These Undervalued Tech ETFs on the Dip?).

Sustainable Investing ETFs

The coronavirus pandemic has impacted the investing world, with market participants showing greater interest in conscious investing, spurring demand for environmental, social and governance (“ESG”) funds. According to the Forum for Sustainable and Responsible Investment’s 2020 trends report, total U.S.-domiciled sustainably invested assets under management, including institutional and retail, rose 42% to $17.1 trillion from $12 trillion between 2018 and 2020, per a CNBC article.

To gain exposure to ESG investments, investors can consider iShares ESG MSCI USA ETF (ESGU - Free Report) , Xtrackers MSCI USA ESG Leaders Equity ETF (USSG - Free Report) , Vanguard ESG U.S. Stock ETF (ESGV - Free Report) and Nuveen ESG Large-Cap Growth ETF (NULG - Free Report) (read: Guide to Socially Responsible ETFs).

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