What is thematic investing and why is it so special?

Thematic investing is just a top down approach which gives an investor complete knowledge about the macroeconomic themes and trends through managed funds and baskets of the related stocks. This is way different then the dividend index.

The Total return indices and this concept are polls apart contributing to similar motive. Now this type of investing in simply done by the investor, he has to choose the theme or the trend which is very profitable according to his analysis.

His investment can be speculative, short term or structural as well, and this could impact the different regions and sectors.

He first makes the list of the possible and profitable stocks that he can invest in and then narrows down the list of the stocks of the particular theme and these are based on various predictions, factors and liquidity, products characteristics and even quality of management.

There are many pros of these types of investing and following are those-

• Intuitive investing – this is one of the biggest benefits of the intuitive investment; one can put in their ideas and thoughts and analyze everything and only then make an investment. So people who are having in depth knowledge will be benefited a lot from this method.
• Align your values – One can just simply align your values and work on the themes and trends they are passionate about.
• Expand their choice – investment with this method is not limited to any industry or particular index, one can invest in absolutely anything of their own choice.
• Generate Alpha – this can absolutely provide an opportunity to the investors to generate the Alpha.
• Flexible and transparent – The investors are able to create their very own motifs and one can also get superior quality of transparency and there are no hidden fees as well.
• Easy – fortunately this has now gained popularity and in the recent years and to democratize access for investors of all sizes.

So these were the n no of benefits one could get from this type of investment in the shares.

Source : https://dividendindex.tumblr.com/post/161191109757/what-is-thematic-investing-and-why-is-it-so

How to invest in an index?

Well everyone has now moved into index investment, and this has boosted the business of the Index provider.  As there are many types of Index calculation becomes difficult.

The custom index is one of the most difficult indexes to calculate and investing in the indexes must be done very carefully.

What is index investing?

If one wants have their own shares in the best known companies than they can easily do with the index investing.

Following are the types of index investment

• The Dow
• The Standard and Poor’s 500
• The Nasdaq
• The whilshhire 5000

Now each group of the stocks chosen are to represent portions of the stock market, majority of the investments made in the indexes are from the Standard and poor 500 and the whilshhire 5000.

Companies like Tupperware, Microsoft and heard of General electric fall under the category of the standard and poor 500 and the whilshhire 5000.

Why should one invest in an index?

The broad market index is the most profitable one as it basically represents the overall stock market; only about 20 percent of the total mutual funds have outperformed the standard and poor 500 index.

And one of the main reason that investing in the index is better as it is very cost efficient, so people investing here will be saving a lot of money.

The main reason behind them being cost efficient is that they significantly reduce the cost of their operating fees and gives good opportunity for the investors to grow.

There are two main ways to invest in the indexes

• Mutual funds
• Exchange traded funds

The ETF’S are just like the regular stocks of the American stocks.

Now one of the most frequent questions asked to us is that whether mutual funds are better or ETF’S but honestly investing in any of these is identical you can notice a very similar pattern in their investment.

The index funds charge the cost of the running fund and having this expensive ratio’s higher is bad to invest in that index.

Source : http://dividendindex.blog.fc2.com/blog-entry-5.html

How are index companies earning profit?

Making analysis and indexes how are the index company making profits out of it? Well index on its own has no great value; the value of this is derived with its underlining assets.  For instance, if we take the S and P 500 index the value of it is derived from spot.

In the year 2015 the corporate earnings were shrinking and the index maintenance was very important, the companies then decided to take a bigger piece from the smaller piece of profit. Index development helps the companies to make bigger profits.

Now spot being the asset on which the value will be derived cannot be traded, the index features are traded which highly depends on the appreciation and depreciation of the market. And for the trade of it there should be an appropriate seller and buyer and until they are there the contract is not generated.

This is called nothing but open interest, the buyers and seller both put some money and decides the exchanging amount. So the increase in interest means more amount is added to the index.

And the companies that fall under this index are big players, even in the loss making period or the drop down the real value of the assets of the company is still high.

And according to the report the profit of the companies of the S and P 500 have had increased in the year 2016.  The big generators of the profits are financial firms including the Hathaway.

Index maintenance includes monitoring and implementing the factors contributing to the index.

The companies earn a huge profit by this and investors as uses their indexes before investing is a sign of them using it properly.

To help the S and P 500 be consistent in the market over the time maintenance of this is used and if they develop than the chances of increment in profits is higher.

And as an Indian investor if you invest in S and P 500 companies even in the least of profits you can make a major junk of profit in Indian rupees.

Source : https://storify.com/dividendindex/how-are-index-companies-earning-profit

Smart beta and pros and cons

Smart beta is nothing but used to track the market index, this is different from the traditional index funds. The managers of this might use equal weight index services, the approach on which the weighted based upon a fundamental approach.

They analyze every aspect like the equity index as well and there are many arguments about the pros and cons of the smart beta index. They remove the emphasis on the stocks in the index with the largest market cap weightings as these stocks perform bad they have a very sizable impact on the performance of the index relative to the smallest components of the index.

Though the ETF’s of the smart beta index have quite higher expensive rations than the market capitalization weighted index products they are yet somewhat cheaper than most of the active managed funds.

Pros of the smart beta strategies-

• They have superior portfolio returns.
• The smart beta helps the investor to reduce the portfolio risks
• The dividend income increases considerably with the smart beta
• The smart beta gives a more efficient and has a very good exposure to the equity risk premium

And according to the smart beta strategies there are quite a few cons and risk factors for the investors as well and following are they-

• False Alpha
• Crowding or extra money that has been a money chasing strategy
• Tracking error, the smart beta is not good enough to track the weight of the indexes.
• Many a times the smart beta index ETF’s do not trade very well unlike the vanilla index products.

The smart beta has both its pros and cons, this is the best for at least the small investors and many of the financial advisors use this product directly using the ETF strategists.

Before investing a person must understand how these smart beta strategies must work and how and why does it provide extra value to the investors and even enhances their returns and even helps them to lower the risk of their investments in the funds.

source : http://dividendindex.page.tl/Smart-beta-and-pros-and-cons.htm