Investopedia: “Thematic ETFs: Helping Clients Invest in What They Care About”
Investopedia, July 31, 2025 — In today’s article by Marguerita Cheng, CFP Pro®, she writes, “As interest in thematic exchange-traded funds (ETFs) surges, demand and supply continue to increase. By the end of April 2025, more than $300 billion had been invested in global thematic ETFs, according to Funds Europe, a digital magazine for the asset management industry. On the supply side, it reported 1,582 thematic ETF funds listed globally with over 3,000 individual listings across 53 exchanges and in 41 countries. As a forward-looking advisor who cares about your clients’ goals and values, you should learn how to engage with them on this topic and provide proper guidance so that they can achieve their goals while managing all relevant risks.”
KEY TAKEAWAYS include:
- Thematic ETFs allow investors to commit funds to causes they care about—such as climate change, AI, or healthcare—offering a purpose-driven approach to investing.
- Their unique risk profile can reduce portfolio correlation and add a new layer of diversification, with the potential for long-term outperformance, as seen with past themes such as e-commerce.
- Thematic ETFs open doors for personalized, values-based conversations between advisors and clients.
- While thematic ETFs are promising, they also come with risks, including hype cycles, illiquidity, and thematic underperformance.
- Advisors must manage these risks by limiting exposure (5% to 20% of the portfolio), selecting well-managed ETFs with viable, growth-oriented themes, and educating clients on the dangers of chasing fads or entering too late.