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“Pitting good versus evil in the world of thematic ETFs”: AFR

Be sure to uncover what's 'under the hood' when investing in theme-based or thematic ETFs (exchange-traded funds). Simply trusting a catchy title does not constitute sufficient due diligence, according to Alvia Asset Partners CIO Josh Derrington.

Many thanks to Jonathan Shapiro for including CIO Josh Derrington’s recent comments in his article: Pitting good versus evil in the world of thematic ETFs:

Josh Derrington of investment firm Alvia Asset Partners says investors should be apprehensive and selective about thematic ETFs.

That’s because often the underlying holdings don’t quite align with the aforementioned theme and the ETF’s ultimate performance may have little to do with the actual trend.

“Pivotal to any decision to invest in an ETF should be to whether the companies within the portfolio will actually benefit as you hope, and whether the trend will play out in the timeframe you believe,” he says.

He cites a few examples such as a blockchain ETF with holdings in AT&T, Microsoft and Amazon, and a space ETF that owns a thematic 3D printing ETF and farm equipment manufacturer John Deere.

The popularity for themes such as robotics or artificial intelligence make them a natural target of focus for manufacturers of investment products. And that is the raison d’etre of ETFs – easy and equitable access.

Pitting good versus evil in the world of thematic ETFs“, Jonathan Shapiro (AFR, Sep 23, 2021)

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