How Thematic Investing can Align Your Money with Your Values

By Tim Hanna, CFA

What if an investment portfolio could be more than just a path to financial growth? What if a portion of your investments could also reflect the issues you find most compelling, the values you most believe in, or the future you most want to see?

That’s the core idea behind thematic investing. It’s not new, but this investment approach is gaining momentum because it offers the ability to invest in the big ideas shaping tomorrow’s world while potentially capturing long-term opportunities.

What Exactly Is Thematic Investing?

Thematic investing focuses on long-term, macro-level trends (called megatrends) rather than traditional sectors or individual companies. It provides investors with the opportunity to create possibilities for growth by focusing on what’s changing in the world and putting money into something they care deeply about.

Invested money is rarely neutral. Every dollar a person invests ultimately supports something. When you buy a broad market index fund, for example, you’re likely buying into everything from giant oil companies and tobacco firms to healthcare innovators and renewable energy pioneers all at once. You’re taking a stance; it just happens to be a vast and indiscriminate one.

Thematic investing can flip this approach on its head. It essentially says: “I have thoughts about what truly matters and where the world is headed, and some of my investment portfolio should reflect that.”

Why Thematic Investing Matters Now

While thematic investing has been around in the financial services industry for some time, it’s become increasingly relevant. More people are looking to express their values in meaningful ways through their investment choices. The great wealth transfer is underway, and trillions of dollars are passing between generations, driving increased interest in thematic investing. And this increased interest represents a shift in how many people think about the connection between their money and their values.

Making It Personal

Every investor has different views about where the world is going and what will matter most. As we often say, everyone has a unique money story. Discovering what true wealth means to you is the key to understanding how your investments can reflect your values and create the change you desire.

Understanding your values and priorities is the foundation of any meaningful investment strategy. Before exploring specific investment approaches like thematic investing, it’s essential to clarify what matters to you. At Planning Alternatives, many of our clients begin with our True Wealth Assessment — a tool designed to help you discover where you’re thriving in life and where you might want to focus more energy and attention. This clarity about what wealth means to you beyond the numbers creates the foundation for investment decisions that align with your whole life.

Thematic investing lets you express those views through your portfolio. From AI and animal welfare to cancer research and casinos, the range of potential themes is remarkably diverse. Some investors focus on environmental themes such as renewable energy solutions, water scarcity, or sustainable agriculture. Others are drawn to genomics, cybersecurity, or the future of work.

When you’re clear-eyed about your values, thematic investing can become a natural extension of your broader financial life.

The Growth Mindset Connection

Thematic investing can also embody a growth mindset – a belief that positive change and innovation are not only possible but inevitable. When you invest thematically, you’re putting your conviction behind the idea that human ingenuity, technological advancement, and societal progress will create value over time.

This approach requires looking beyond today’s headlines to imagine the world in five, 10, or 20 years. What problems will humanity solve? What innovations will transform how we live? What kind of future do I want to help build?

Thematic investing enables you to actively participate in the trends and solutions you believe will be most impactful. This move from passive observer to engaged participant is at the heart of the growth mindset that drives both personal development and meaningful wealth creation.

The Power of Alignment

When your investments align with your worldview, you’re able to track your returns while also watching how your convictions play out in real time. This creates a different relationship with your portfolio and how you respond to volatility.

Companies involved in historically impactful themes (think smartphones or e-commerce) delivered significant outperformance during their rapid adoption phases. When you hit upon a structural trend, the rewards can be substantial.

Implementing Thematically

Successfully implementing thematic investing requires a thoughtful, disciplined, and balanced approach.

• Start with conviction, verify with fundamentals. Choose themes based on your genuine beliefs about long-term structural change, but ensure those themes have real growth drivers beyond personal passion.
• Keep it proportional. Thematic investments typically work best as satellite positions, perhaps 5-10% of your equity allocation.
• Diversify across themes. Multiple differentiated themes provide better risk management than concentrating in a single conviction.
• Monitor but stay patient. These are often longer-term positions. Quarterly volatility is expected.

Understanding the Considerations

While thematic investing offers compelling opportunities, it’s critical to understand the considerations that come with this approach.

• Theme performance can vary widely. Some themes deliver extraordinary returns while others fade. Timing entry and exit points is notoriously difficult, even when you’re right about the long-term trend.
• Concentration brings additional risk. Thematic investments carry greater risk than traditional equity exposures. They can swing based on theme-specific developments unrelated to broader market factors, which is why diversification across multiple themes is often recommended.
• Winners can be hard to predict. Even when a theme unfolds as hoped, identifying which companies will capture the value is challenging. The leaders a decade from now likely aren’t who you’d expect today, and that’s part of what makes it interesting.
• Patience is required. Thematic investments often take years to fully materialize. For long-term investors, this extended horizon can actually be an advantage.

True Wealth Is More Than Returns

True wealth is about maximizing energy and vitality in all areas of your life: your health, your relationships, your sense of purpose, and the difference you make.

When investments are in line with your worldview, something profound happens. That alignment creates a different kind of return: the sense that your financial life reflects your whole life.

Thematic investing won’t guarantee profits, and it carries risks. But it offers what traditional approaches can’t: the knowledge that your wealth, in all its dimensions, is working in alignment with what you believe.

The world is changing. Your portfolio can change with it, or better yet, help shape it. And there’s real joy in knowing your money is working toward the future you want to see.

References:

• Thematic Funds Landscape: The Latest Trends for Asset Managers
• How Millennials and Gen Z Are Driving Growth Behind ESG
• How to seek powerful themes in client portfolios
• Megatrends & thematic investing

Thematic investing involves significant risks including concentration risk, volatility, and the potential for loss. This approach should be considered as part of a diversified portfolio strategy. Alignment with values does not guarantee investment returns, and many themes fail to deliver anticipated performance.

At Planning Alternatives, we help you manage your wealth in alignment with your values, goals, and the legacy you want to leave. As fiduciary advisors, we always — and only — make decisions in your best interest. If you’re interested in exploring how thematic investing might fit into your personal path to True Wealth, let’s connect.