Chapter 08 · Advanced · 6 min read
ETF Strategies
Indexing, factors, themes and everything between
Separate a compelling investment story from a strategy you understand.
Different engines
A broad-market strategy owns the whole game rather than guessing the winner. Dividend strategies focus on income characteristics, while value looks for companies that appear inexpensive and momentum follows strong price trends.
Quality strategies often favour profitable, financially strong companies. Each approach makes a different claim about what may drive risk and return.
Themes and active decisions
Thematic funds express a view about where the world is going — AI, robotics, clean energy or space. The story can be right while the investment is wrong if expectations are already reflected in prices.
Active ETFs give a manager discretion within a mandate, potentially adding flexibility but also cost and manager dependence.
Words worth knowing
Open dictionary- Value
- A strategy focused on companies that look inexpensive by selected measures.
- Momentum
- A strategy favouring securities with strong recent trends.
- Thematic
- A strategy built around a long-term idea or trend.
What does a thematic ETF mainly express?
Try it yourself
Pick one strategy and write the market belief it relies on, plus one reason that belief could disappoint.
Can you spot it?
Clean energy demand grows quickly, but clean energy shares fall. Can the trend be right while the fund disappoints?