How Should Thematic ETFs be Weighted? | Page 2 of 2 | ETF Trends

“Which company will be the dominate robotics maker in 20 years? Which company will struggle and go bankrupt?,” said Global X. “With a market cap weighted approach, we gain more exposure to the companies as they begin to dominate an industry and reduce exposure to those that are failing.”

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In many of the industries represented by thematic ETFs, there will always be smaller companies emerging, but cap weighting can still serve investors well.

“Yes, small companies will emerge and challenge the status quo, but in many of these new industries, we think there are substantial economic benefits to being larger. And as a small company begins to prove itself, we’ll begin to own more of that company,” according to Global X.

For more information on thematic ETFs, visit our Thematic Investing Channel.