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How to take advantage of trending market themes in one click

There’s no denying the world is changing at a more rapid pace than ever before. The major disruptors – like Uber, Airbnb and freelancer - are turning the whole way we think about doing business on its head, just like the Internet altered the way we distribute media.

While these changes will result in some losers, investors do not have to be among them if they take a thematic approach to investing and invest in an array of companies that are leveraged to this particular theme.

The good news is there are now trading platforms that offer you instant access to these themes in specially constructed portfolios.

The key, of course, is picking the right theme. Here are five that are set to profit.

Aging population

Over the next 40 years, the proportion of us aged over 65 years will almost double to around 25% of the entire population. That means there will be a bigger demand for companies that service this group of people.

They will demand a better quality of aged care – one that provides a greater array of care levels and tailored services to meet their individual needs, such as in-house hairdressers and gyms.

Companies that provide travel for this sector and, of course, many healthcare companies will benefit from this theme. Our aging demographic is one of the key reasons why the healthcare sector has been the best performing sector on the ASX over the last decade. To the end of August, it’s up an average of 15.1% pa for the past 10 years, compared to an average of 6.2% pa for the S&P/ASX 200 over the same time period.

Big data

Companies are getting better at analyzing the vast array of information at their fingertips to provide better services for customers. Think of the rewards programs of the big two supermarkets – ever wondered why they always offer you specials on things you buy regularly?

Companies that specialize in this kind of research, or even just provide the facilities in the cloud that make it possible, are part of a strong theme to chase.

It’s not only the IT companies that can benefit from this theme, but data centre operators – or the ‘hardware’ providers – are another beneficiary, as are the real estate investment trusts that hold investments in these data centres.

Chinese middle class
 
One of the biggest themes of the next decade will be the growing Asian middle class consumer.

The OECD predicts that the global middle class will more than double by 2030 – up from 1.8 billion in 2009 to 4.9 billion people by 2030. But two-thirds of the new middle-class is expected to be Asian, with a large percentage of those Chinese.

Rising daily disposable income translates to diet upgrades, so consumer staple stocks benefit. Think international names like Nestle, Proctor & Gamble, The Coca-Cola Company and PepsiCo Inc.

Eventually providers of healthcare in China, and other services like wealth management, will do well as the country builds the relevant infrastructure and adopts the necessary regulation. But in the immediate term, cashed up Chinese will flock to Hong Kong to spend their newly acquired wealth.

Clean technology

Whether we like it or not, the science proves that global warming is real. This means our reliance on fossil fuels will have to change and even the big energy giants are realizing this. A local example is that of AGL, which announced earlier this year that it would not buy any more coal-fired power stations, and would close all existing coal-fired power stations by 2050.

The world will need to rely more on clean energy and solutions that use natural resources, such as solar, wind and biomass. The leading companies in this space have been working on these solutions for years, and the majority of the larger firms are located in the United States.

Fintech


Fintech is the latest buzzword encompassing companies that produce and distribute financial technology. Think roboadvice, mobile payments, and tailored banking services. They also provide the facilities that enable crowd funding, peer-to-peer lending, and fast money transfers. Companies that provide platforms that enable access to thematic investing portfolios fall into this category too.

A rapid take up of smart phones, and the expectations of the younger generation for immediate responses from their service providers, partly explains this increase. Also as companies in this space also enable consumers to bypass many of the traditional providers of financial services, dissatisfaction with incumbent financial institutions is also a factor.

Many larger players – such as Facebook and Google – are working on providing financial services via Fintech, but so are many start-ups, particularly in the US.

For more on how you can use thematic investing in your portfolio, and the platforms that help you to do so, tune into our webinar on this topic on 28th October. Click here to register.

Published on: Monday, October 26, 2015

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