Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Thematic investing

Thematic investing is the process of buying, selling or trading multiple shares​ that belong to a certain group or concept. Thematic investors often invest in baskets of stocks to take advantage of sectors of the economy that they expect to do well over their investment horizon, focusing on technology, healthcare or energy trends, for example.

A thematic investor can create their own customised portfolio or they can invest some of their funds in groups of securities that have been created by others. This article will explore the pros and cons of thematic investing, along with examples of how to invest in thematic assets using CFDs and spread betting with our share basket​ products. Trading on our baskets of stocks can help to offset risk when a particular company or constituent is underperforming, which is an alternative to investing in singular shares.

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What is thematic investing?

Thematic investing aims to capitalise on broad trends that may play out over an investor’s time horizon. Rather than choosing to invest in individual companies that look promising, thematic investors tend to focus on specific areas of the economy.

For example, if a person believes that electric cars​ are the way of the future, they could invest in companies that manufacture or subsidise electric cars, components, charging stations or charger parts for electric vehicles, or have products and services related to this sector. Rather than focusing on a specific company involved with the industry, such as buying individual Tesla shares​, traders could invest in a rounded portfolio of companies, as it is hard to know how a specific company will perform in the long-term. Therefore, if the overall industry performs well, then the share basket should do too.

What is basket trading?

Basket trading focuses on multiple stocks at once that typically share a common theme. Basket trading is therefore the process of buying and selling multiple shares in one open position, as opposed to individual companies. This may appeal to traders that want to invest in a certain sector, industry or trend but don’t want to place their money in only one stock.

There are multiple types of share baskets; an individual trader’s stock portfolio could be seen as a share basket, as well as a hedge fund’s collection of holdings. Exchange-traded funds​ (ETFs) work in the same way as share baskets, as they group stocks based on an investment strategy or theme. ETF traders will then encounter either profit or loss depending on which direction the stock values move within that specific ETF.

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Thematic investing examples

Many investment themes can be used to create shares baskets, some of which are explained in the examples below. There are virtually infinite themes, since a share basket could be created based on any idea, concept, or strategy within the financial markets.

  • Sectors – Baskets that reflect a prominent driver of the economy. For example, our Big Tech share basket​ contains 20 top technology stocks across the world, including tech giants Apple, Microsoft and Google.
  • Industries – Industries are the smaller subgroups within sectors. Raw materials is an example of a sector, and gold is an industry within this sector. Our US Gold share basket​ consists of 15 American shares with exposure to the gold mining industry.
  • Protection – Buying a group of safe haven assets.
  • Dividends – A portfolio that is created around high-dividend paying stocks​, or stocks that tend to increase their dividend regularly.
  • Growth – Companies that are experiencing growth in terms of their revenues and earnings, which can be calculated when a trader performs company analysis. Our RRG Momentum+​ share basket is re-calculated on a quarterly basis to capture the stocks with the highest momentum and growth prospect within the FTSE 350.
  • Value – Stocks that are trading at a low valuation with high potential for profit, and thus may be a bargain. These are also referred to as undervalued stocks​ and are preferred by value investors such as Warren Buffet.
  • Demographics – Investing in stocks that will benefit from an ageing population, or that will benefit if there is a baby boom, for example.
  • Emerging markets – Investing in companies in countries that are up and coming, as opposed to those with well-established economies and existing blue-chip stocks​.
  • New technologies – Investors identify technologies with big growth potential. An example includes our Innovators share basket​, which includes 34 companies that have dedicated time into research and development of a new product or technology subsector, ultimately overtaking their competitors in market share.
  • Strategy – Following a successful hedge fund or investor’s strategy, such as Warren Buffet, Joel Greenblatt or Peter Lynch.
Explore thematic investing with us

Listen to our Opto podcast below featuring Jay Jacobs, Head of Research & Strategy at Global X, as he talks us through the benefits of thematic investing and current themes to watch in the stock market.

Share baskets

At CMC Markets, we offer a wide array of thematic share baskets for you to trade on, whose performance mirrors the stocks that make up that specific group or basket. Some investors may wish to hold their positions in the long-term if they believe in the future rates of return, whereas other traders may opt to trade or even short sell the share basket to participate in fluctuating price action.

Below is a list of excusive share baskets that we currently offer to our clients. You can open a live account to deposit funds and start spread betting or trading CFDs on our share baskets, or a demo account, which comes with £10,000 worth of virtual funds to practise beforehand.

Automation & Robotics Big Tech
Cannabis China Tech
Collaborative Technology Cybersecurity
Driverless Cars EU Automobiles
European Banks Gaming
Luxury Lifestyle Oil & Gas
Remote Lifestyle Renewable Energy
SaaS Social Media
Streaming UK Banks
UK 100 US Banks
US Gold 5G

Custom CFD portfolio: Joe Kunkle

Joe Kunkle is the head research analyst at Relativity Capital and founder of Options Hawk, and has created five custom CFD portfolios that can be traded on our online trading platform​, Next Generation. These thematic share baskets are regularly rebalanced and updated on a quarterly basis. They contain multiple stocks of a particular sector, which can help to diversify risk in comparison with investing in one singular stock. The portfolios are commission free to trade, and we provide a leverage ratio​ of up to 5:1.

Joe Kunkle’s custom CFD portfolios involve the following themes:

  • Fintech
  • Future of Work
  • Outdoor Living
  • Direct-to-Consumer
  • Innovators

Joe’s methodology is based on providing share baskets that focus on large disruptive trends in the economy, then buying on those companies or stocks that are poised to benefit from this trend. Learn more about Joe Kunkle’s share baskets >

Custom CFD portfolio: RRG

RRG Research is the company behind the RRGUK Momentum+ share basket. RRG stands for Relative Rotation Graphs, which show whether a stock is in a stage of leading, weakening, lagging or improving. The fund focuses on stocks in the improving category, which are rotating into a position of strength. Only the top-10 stocks are included in the portfolio.

This share basket finds the strongest relative momentum stocks within the FTSE 35, and it is rebalanced quarterly. Learn more about RRG’s share baskets >

List of thematic ETFs

Exchange-traded funds (ETFs) are similar to a stock index or share basket, as they tend to include stocks based on certain themes. In total, there are over 1000 ETFs that are available to trade through our advanced trading platform. Some of the most popular ETFs on our platform that follow a thematic investing approach include the following:

Learn more about ETF trading​ with us.

Thematic investing platform

As shown above, our Next Generation trading platform​ provides many thematic assets to invest in, from shares to ETFs. From the Product Library, there are multiple ways to navigate to share baskets. Browse our financial instruments​ by typing in a product name in the search box that match the name or description.

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Thematic investing: advantages and disadvantages

Thematic investing offers the advantage of investing in a group of stocks, as opposed to just one. This helps to diversify your trading portfolio while offsetting some of the risk that is inherent when investing in shares. Whereas the health of one company could decline rapidly and cost you to lose a lot of capital, this is less likely to happen with a group of stocks, although share baskets can still see large price swings.

A share basket is an efficient way to trade on a portfolio of stocks. Spread betting or trading CFDs on the RRG Momentum+ share basket, for example, provides investors with exposure to 10 underlying stocks in one transaction. Buying 10 individual stocks would possibly take more time and increase trading fees​.

However, one of the drawbacks of share baskets is that they may provide lower returns compared to only buying the strongest stocks in the theme. For example, a share basket will include some high-performing stocks and others that provide only modest returns. Choosing to invest in only the top-performing stocks in the industry could possibly yield a higher return.

Share baskets also come with a fee, called an expense ratio. It is the price for investment management. The performance of the share basket is reduced by the expense ratio. If a share basket returns 30% in a year, and the fees associated with the basket are 2%, the net return to the investor is 28% for the year. Whether trading individual stocks or share baskets, the price of these products are subject to market forces. Their prices may move considerably, or not very much, at given times.

Traders may want to consider the use of a stop-loss order​ to control risk if the price moves against them, and they could also consider having a profit objective, where they will take a profit when a desired outcome is reached. When trading any share basket or financial instrument, past performance is not always indicative of the future.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.