The idea of thematic investing has been welcomed by investors who are well aware of the challenges and opportunities facing humanity. Wanting to support new solutions that meet future challenges, they are investing their resources in projects that seemed impossible: self-driving cars, nanny robots, advanced wastewater treatment devices, etc. If you are passionate about a particular issue and want to take part in a project, thematic investing will give you this opportunity. At the same time, you must understand the risks that you will face when choosing this form of investment.
Risks of Thematic Investing
An investor always faces certain risks when investing their assets. However, it is better to know them in advance to develop the right risk management strategy. When it comes to thematic investing, you may encounter the following challenges.
Liquidity Problem
When you trade in a busy market, you can easily find both the product and the buyer. When you choose a narrow niche investment project, difficulties may arise in the case of selling shares or other financial instruments. But do not rush to sell your assets below the market price. If you urgently need money, it is better to take a short-term loan by comparing terms from different lenders on the Payday Depot platform. Since thematic investing focuses on the future, the project you’re invested in could receive much more support a little bit later. A large number of traders will come to the market wanting to buy shares you want to sell.
Inability to Distinguish Hype from a Promising Project
Future trends are met by the audience with particular interest. Therefore, some topics become viral on the Internet even if there is no technological solution yet for their implementation. Fraudsters may create fake companies to take advantage of the popularity of a particular topic. Therefore, before making a final decision, it is better to consult with experts regarding the feasibility of the investment project.
Importance of Time Variable
Sometimes, a technologically effective solution appears that can solve an existing problem, but society is not ready to accept it yet. You and other enthusiasts can be sure that the proposed solution is the most optimal for a specific challenge. However, it will take a lot of time to convince other people. Are you ready to wait another 10 years for a return on investment? Therefore, before investing, study public opinion polls and discussions among experts regarding the readiness of society to accept this technology.
The risks of thematic investing do not mean that you should completely give it up or temporarily refrain from investing when new opportunities arise. Space exploration, robotics & AI, smart security, blockchain technology, mechanisms of weather control — these and many other grand trends are captivating specialists and non-specialists all over the world. Be one of the first to join their progress. But at the same time, weigh the risks and develop a competent risk management strategy so that your enthusiasm could receive a deserved profit and inspiration for other innovative projects.
Published by HOLR Magazine.