What does it mean to invest in a sector of the sharemarket?
A sector is used to describe a group of companies in the market that provide similar products or services.
Taking the Australian sharemarket as an example, with over 2,000 companies listed on the ASX, categorising companies by sectors enables investors to compare businesses based on their sector or industry.
The Global Industry Classification Standard (GICS), jointly established by global index providers S&P Dow Jones Indices and MSCI, is the global standard for categorising companies into sectors and industries.
GICS categorises stocks into 11 sectors and 24 industry groups, 68 industries and 157 sub-industries.
- Communication Services
- Consumer Discretionary
- Consumer Staples
- Health Care
- Information Technology
- Real Estate
What is a sector ETF?
A sector exchange traded fund (ETF) aims to track a benchmark index for a particular sector or industry, for example, financial services, technology, or energy.
As an example, the MNRS Global Gold Miners ETF – Currency Hedged aims to track the performance of an index (before fees and expenses) that comprises the largest global gold mining companies (ex-Australia).
There’s also the QFN Australian Financials Sector ETF which aims to track the performance of an index (before fees and expenses) comprising the largest ASX-listed companies in the financial sector, including the ‘Big 4’ banks and insurance companies but excluding Real Estate Investment Trusts.
Why invest in a sector ETF?
Sector ETFs offer investors a simple way to access particular areas of the global or local economy.
In addition, ETFs can help to achieve diversified exposure to a sector without taking on significant stock-specific risk, because the fund invests in a portfolio of companies operating in a particular sector or industry.
What is a thematic ETF?
Thematic investors try to identify long-term transformational trends, and the investments that are likely to benefit if those trends play out. These themes tend to be one-off shifts that irreversibly change the world, driven by powerful forces such as disruptive technologies or changing demographics and consumer behaviour.
Thematic ETFs are ETFs that select underlying holdings based on their exposure to these particular investment themes or ideas. They are typically agnostic to industry sectors and geographical boundaries, unlike sector ETFs, which invest according to traditional or pre-defined industries or sectors.
How do investors use thematic ETFs or sector ETFs in their portfolios?
While thematic ETFs differ from sector ETFs, the reason investors are attracted to them is typically the same – to gain exposure to a particular area of the market (categorised by a theme or sector).
Such investors may be looking to obtain exposure to a portfolio of companies within the specified theme or sector, rather than (for example) trying to identify a specific company that may become the future leader in the space. Thematic or sector ETFs are a convenient and cost-effective way to do this.
Typically, investors use thematic or sector ETFs to gain targeted or tactical exposure, and to complement their core or foundation portfolio allocations.
How do I invest in thematic investment funds or sector ETFs?
Betashares sector and thematic fund range
Asia Technology Tigers ETF
Exposure to the 50 largest Asian technology companies (ex-Japan)
Global Gold Miners ETF – Currency Hedged
Invest in a portfolio of the world's leading gold mining companies
Global Robotics and Artificial Intelligence ETF
Access a portfolio of the world’s leading robotics and AI companies.
Global Cybersecurity ETF
Access the world's leading cybersecurity companies
NASDAQ 100 ETF
Invest in the NASDAQ-100 in a single trade
NASDAQ 100 ETF – Currency Hedged
Currency hedged exposure to the NASDAQ-100 in a single trade
Global Energy Companies ETF – Currency Hedged
Access a portfolio of the world’s largest energy companies
Global Healthcare ETF – Currency Hedged
Invest in a portfolio of the world's leading healthcare companies
Global Banks ETF – Currency Hedged
Exposure to the largest global banks (ex-Australia) in a single trade
Australian Financials Sector ETF
Gain exposure to the biggest companies in Australia’s financials sector
Cloud Computing ETF
Gain exposure to global cloud computing companies
Australian Resources Sector ETF
Gain exposure to the biggest companies in Australia's resources sector
Digital Health and Telemedicine ETF
Exposure to a portfolio of leading global digital healthcare companies
Exposure to a portfolio of leading global companies in the solar energy industry