Timing the market is difficult. So is timing individual investment factors and the performance of specific sectors. Along related lines, identifying the right theme at the right time in a growing universe of thematic ETF is tricky, too.

The Global X Thematic Growth ETF (Nasdaq: GXTG) is designed to help investors ease the theme identification burden.

The underlying index for GXTG first assigns each eligible Thematic ETF to a traditional sector. Next, at the annual reconstitution, the index applies a quantitative screen on the underlying securities comprising each eligible ETF to determine each ETF’s aggregate sales growth metric. This sales growth metric is used to determine the Thematic ETF with the highest aggregate realized sales growth within a given traditional sector, which ultimately determines the selection for inclusion in the index.

The current environment is proving to be a good time for GXTG’s multi-theme approach as the fund is levered to vital trends such as working from home and the increasing need for a stay at home entertainment options.

“By and large, the COVID-19 pandemic is proving to be an accelerant for many long-term structural trends,” said Global X analyst Pedro Palandrani in a recent note. “With widespread concerns around public health and global economic growth, consumers, companies, students, and governments are all rapidly adapting their behaviors to cope with these new realities. Many of these shifts involve leveraging the latest technologies to make stay-at-home orders more palatable.”

Why GXTG Is Important Today

GXTG reaches a lot of corners of the thematic universe, but a key to the fund’s methodology (and advantages) is that Global X has a common-sense approach to defining thematic investing. As a result of its dept and diversity, GXTG can be seen as a core holding, not just a tactical strategy and its coronavirus reach is material.

“This includes utilizing video-conferencing for work, school, and doctor’s visits, enjoying streaming and gaming platforms for entertainment, connecting with friends and family on social media networks, and shopping for goods online rather than in-store,” notes Palandrani.

Adding to the case for GXTG is that the fund goes beyond mere theme identification, potentially providing investors with a better mousetrap for accessing disruptive ideas.

“Properly investing in thematic disruption requires a two-step process,” according to Palandrani. First, we believe that investors should identify, from the top down, the powerful macro-level trends that they expect will disrupt large portions of the economy. Second, they should properly identify the companies that stand to benefit from the materialization of those trends.

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

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.