We often hear investors discussing a particular sector doing better than others or the possibility of it doing better in the financial market. Yet, most of us fail to take the initiative to make the most of that market sentiment. It’s because most people are unaware of the concept of thematic investment. Consider this: When a sector does great, the products and services associated with it also perform better. For example, the healthcare sector, despite some losses, has been showing good potential as the demand for allied products and services has skyrocketed amid the pandemic.
Experienced investors are always on the lookout for such potential rallies. When they foresee a favourable situation, they put their money into stocks and funds associated with the sector — like for the healthcare sector it would be pharma companies, hospital chains, health insurance firms, nursing homes, and traditional medicine and healing centres — hoping they will yield a good return in the near future.
What is thematic investment?
It’s an investment strategy that helps investors identify macro-level trends and put their money into businesses and products that are likely to benefit from those trends. Thematic investment requires investors to take advantage of shifts in market conditions by successfully predicting those shifts in advance. A person with a great foresightedness makes for a good thematic investor.
Factors to consider for thematic investment in healthcare:
1. Look at the long-term horizon. Most investors consider thematic investment as a tactical tool. With the healthcare sector in India showing a gradual and consistent growth for a few years now, investors should try to analyse it for long-term investment.
2. The potential of the sector. The growth trend is likely to keep growing further in the near future, backed by vaccine and services demand. Also, pharmaceutical firms are hoping that developing new treatments for illnesses will continue to drive their revenue.
3. Track a wide range of products. A thematic fund based on the healthcare sector may have stocks from several companies in its portfolio. It’s difficult to keep track of all these stocks but investors should pay attention to news related to the sector. Paying attention helps them gain insights into how these stocks may perform in the future.