Scandi Surge and Thematic Vests...

I was doing a bit of Vesting research recently, and stumbled across a contrast between SAFE and RISKY, two things I've never considered before...

Safe Nordi...

During a year of global uncertainty, the Norwegian krone and Swedish krona have emerged as the best performing among the G10 basket of currencies, going up by roughly 10% and 8% respectively against the US currency.

There are a range of possible reasons for this boom: expectation of interest rates going up in Scandinavia, tight fiscal policy, and rising foreign exchange demand for the currencies.

Norway's base rate remains at a 17-year high of 4.5%, and while that might seem set in stone, it places the country well ahead of unpredictable US economic policy.

It could be that prudent governance and finances in these nations of north Scandinavia are compelling investors to seek safer returns within a risky world economy.

Another helping hand has been the increase in defense and infrastructure spending by other European countries. It seems that Sweden's massive defence sector and Norway's exports of steel and aluminium are benefitting.

Thematic Vests...

Thematic funds, which allow investors to invest in future trends or nascent industries (consider AI, clean energy, or cannabis as examples), are again in vogue. Funds with a long history exist: the first notable one, established in 1948, rode the tide of excitement for the arrival of colour television.

But the record of thematic funds is questionable. Morningstar estimates that 68% of themed funds that came on stream in Europe in 2009 have now closed down. Just one in 20 has beaten the global stock market. The problem at the heart of it? Many themes prove to be fleeting fads, and investors find themselves committing themselves to tight strategies that fail to weather changes in the market.

Instead of betting a guess on what the "next big thing" is, a better move may be to put money in widely diversified global tracker funds. They offer a ride in much the same area with less expense and more diversification.

in contrast themed investing is generally akin to putting your chips on a roulette wheel—it might work out, but the odds are against it.

Final thoughts...

80% in Scandi and 20% in a random theme or two...?

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