Diversification
Laith Khalaf, head of investment analysis at AJ Bell, suggests any perceived volatility in thematic investing should be off-set with a widely diversified portfolio.
He says: “Thematic investing is by its nature selective, even if it’s achieved passively, and that means investors can expect higher levels of volatility and risk, so it’s important that thematics are just one part of a much more widely diversified portfolio.”
Investors are often advised to mitigate volatility through diversification. But can mixing themes mitigate volatility?
According to Ullal, having a diversified portfolio continues to be important and investors should avoid going all-in on narrow specialised themes.
He says: “It is important for investors to understand that narrower and more tech driven themes will be more volatile than the broader market, and that themes go through cycles. Having a diversified portfolio continues to be important and investors should avoid going all-in on narrow specialised themes.”
Aamina Zafar is a freelance journalist
