Why semiconductors are 'investment common sense'

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“Tomorrow’s sectors are today’s themes, but creating themes takes a lot more work on the product development side to do the due diligence and know that the companies you own in your ETF are in a leadership position,” he says. “For that reason, you’ll notice that the fees on a lot of these thematic ETFs are a bit higher, which reflects that research into these areas is a lot more comprehensive than it would be with a traditional index or sector strategy.”  

In echoes of the marijuana industry in 2016, Canadian capital markets are showing leadership in psychedelics, prompting Horizons to notch another world first in 2021 – the Horizons Psychedelic Stock Index ETF (PSYK). For those suffering from severe clinical depression, studies suggest that psilocybin can have real benefits on mental health. The sector is gaining traction as a therapeutic alternative to antidepressants, and the market is potentially huge. However, it remains at a very early stage and differs from marijuana in that it’s not a consumer market, but dependent on companies getting FDA approval.   

“But what we’ve seen with our ETF, which has been pretty successful to date, is that people are very excited still about the drug approval process and for some of these companies to use psychedelics for therapeutic use,” Noble says. 

As more and more innovative thematic ideas come into the marketplace, Noble warns advisors that it’s vital to look at whether fund providers are bringing something new to the table or just rehashing an existing index or sector exposure.  

“Why would I pay 30 or 40 basis points for something that has an exciting technology name but really is just Nasdaq 100 exposure?” he says. “When you’re looking to get into newer ETFs or thematic ETF ideas, it’s really important for the investor to ask, ‘Are these companies or sectors I don’t have exposure to?’ If that’s the case and you believe in the theme, there’s probably somewhere you can fit it in to your portfolio allocation.”