Our top pick for thematic investing
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Investors today are looking for more than just average market returns — they’re seeking opportunities to invest in businesses and industries that will shape the future and deliver outsized growth. Thematic investing offers a way to align your portfolio with emerging global trends, from artificial intelligence (AI) to climate change solutions.
With the flexibility of both active and passive management styles, thematic investing provides a unique opportunity for investors to ride long-term trends while managing risks in a dynamic market environment.
But how does it work, and is it the right fit for your long-term investment strategy?
Thematic investing is a strategy focusing on investing in long-term global trends rather than specific sectors or companies. It allows investors to capitalize on themes like technology innovation, demographic shifts or environmental sustainability.
By identifying and investing in transformative trends, thematic investing can target sectors and industries poised for growth over the coming decades.(1) This strategy is particularly helpful for those looking to align their portfolios with their personal beliefs — such as environmental sustainability or ethical innovation — or capitalize on structural changes in the global economy.
Unlike traditional stock picking, thematic investing emphasizes a broad, forward-looking approach, targeting the sectors and industries set to grow over time. It also differs from sector investing, which focuses on a specific industry, by investing across various sectors contributing to a larger, overarching theme.(2)
For example, a thematic fund focused on AI could include companies from multiple industries, such as tech, healthcare and automotive, that are leveraging AI to drive innovation. This ability to cross industries allows investors to diversify their portfolios while still staying focused on high-potential themes.
Our top pick for thematic investing
Trade commission-free stocks and ETFs, and spot emerging trends through thematic investing.
Thematic investing works by identifying broad, impactful trends expected to shape the global economy over the long term.(3)
Investors select themes that align with these trends — such as AI, clean energy or cybersecurity — and invest in a diversified portfolio of companies or assets tied to those themes. This strategy allows them to focus on long-term growth potential rather than short-term market volatility. Integrating thematic investing into your portfolio requires thoughtful asset allocation to ensure it aligns with your overall investment strategy and risk tolerance.
The process typically involves investing in exchange-traded funds (ETFs) or mutual funds that are built around specific themes. These funds provide exposure to a range of companies operating within the theme, minimizing the risk of investing in individual stocks while allowing investors to benefit from the collective performance of a thematic portfolio.
Thematic investing is best suited for long-term strategies, as many of these trends can take years or even decades to fully develop. For example, AI and renewable energy are expected to continue evolving for years, providing opportunities for sustained growth.(4), (5)
Investors should be prepared for short-term volatility and ensure they believe in the long-term viability of the themes they are investing in. Since thematic investing often cuts across multiple stock sectors and geographies, it provides a broader exposure to global shifts compared to more traditional investment strategies that focus on specific industries or countries.
Thematic investing spans a wide array of global trends, from cutting-edge technology to sustainability and social change. Investors can focus on themes that resonate with their interests and long-term beliefs. Below are some popular themes driving growth in thematic investing today.
Many brokers offer thematic investing options, making it easier for investors to access portfolios aligned with specific trends.
From specialized platforms to traditional brokers, there are a variety of ways to engage with thematic investing. Below are a few popular options that offer a wide range of themes to choose from.
Opto is a platform specifically designed for thematic investing, providing access to a variety of curated portfolios that focus on long-term global trends.
Opto offers portfolios in areas like disruptive technologies, green energy and healthcare innovation. What sets Opto apart is its focus on providing investors with data-driven insights and research to back up its thematic choices, allowing for more informed decision-making.
Opto’s thematic portfolios are designed for long-term growth, making them a strong option for investors who want to capitalize on emerging global trends without the hassle of stock picking.
Additionally, Opto’s easy-to-use platform allows investors to explore and track their chosen
themes, offering detailed analytics and performance reports to ensure investors stay on top of their portfolios.
Charles Schwab offers a comprehensive thematic investing experience through its selection of specialized ETFs and mutual funds.
Specific themes available include clean energy, robotics and AI, genomics and biotechnology, fintech innovation and sustainable agriculture. Schwab’s platform is user-friendly and integrates seamlessly with its broader investment offerings, allowing investors to easily add thematic funds to their portfolios.
Schwab’s thematic funds are diversified, giving investors exposure to a wide range of companies within each theme. This approach minimizes risk while offering long-term growth potential, making it suitable for both novice and experienced investors.
Also providing robust educational resources and research tools, Charles Schwab allows investors to better understand the themes they are investing in and make informed decisions.
Fidelity provides a range of thematic ETFs and mutual funds, focusing on trends like clean energy, future transportation, cloud computing and blockchain technology. Fidelity’s thematic funds are managed by industry experts, offering a hands-on approach to investing in emerging trends.
With its robust research and diverse portfolio options, Fidelity Investments allows investors to capitalize on global megatrends while balancing risk. The platform’s thematic funds are designed to offer broad exposure to these trends, making it easy for investors to align their portfolios with their long-term interests.
Fidelity’s low-cost fund options also make it a compelling choice for those looking to keep expenses down while gaining exposure to high-growth themes.
E*TRADE offers a variety of thematic investing opportunities through its platform, with options ranging from AI, 5G and healthcare innovations to renewable energy. E*TRADE provides easy access to thematic ETFs and mutual funds, allowing investors to diversify their portfolios with minimal effort.
What sets E*TRADE apart is its intuitive platform, making it easy for both beginner and experienced investors to navigate thematic investing. E*TRADE also provides educational resources that help investors understand the potential risks and rewards associated with each theme, enabling more informed investment decisions.
Additionally, E*TRADE’s integration with its broader suite of trading tools allows investors to monitor their thematic portfolios alongside other investments for a more holistic view of their financial goals.
Thematic investing offers a unique way to align your portfolio with global trends but also comes with its own set of risks and rewards. Below are some key pros and cons to consider before diving in.
Thematic investing provides a unique opportunity to align your portfolio with global trends that you believe will shape the future. While it requires a long-term view and understanding of potential risks, the growth potential can be significant. Consider exploring the best brokers that offer thematic investment options to diversify your portfolio and capitalize on emerging trends.
Impact investing focuses on generating measurable social or environmental benefits alongside financial returns, such as investing in clean energy projects or social enterprises.
Thematic investing, on the other hand, centers on investing in broad economic trends like technological innovation or demographic shifts without necessarily prioritizing specific social or environmental outcomes.
Sector investing targets specific industries, such as technology or healthcare, concentrating investments in companies within that sector. Thematic investing cuts across sectors, investing in companies tied to a particular trend, such as artificial intelligence or climate change, which may span multiple industries and regions.
Thematic investing can be risky due to the potential for high volatility, as emerging themes may take years to develop fully. Additionally, over-concentration in specific trends or industries could expose your portfolio to sector-specific risks. Investors should have a long-term outlook and be prepared for short-term fluctuations.
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