I’m a big fan of thematic exchange-traded funds (ETFs), especially for beginner ISA portfolios. They focus on particular industries, trends, or themes that have the potential to make investors a lot of money over the next decade and beyond.
Here are a trio of thematic ETFs that I reckon deserve closer attention from investors.
Robotics
The first big trend I want to highlight is robotics in the shape of the iShares Automation & Robotics ETF (LSE: RBTX). This one is pretty self-explanatory, as it focuses on companies associated with the development of automatic and robotic technology.
However, there are many different directions to go with this, including industrial automation, software, and even robot-assisted surgery. The ETF’s holdings reflect this diversity, with the likes of Nvidia (AI semiconductors), Rockwell Automation (factory automation), and Dassault Systemes (virtual twin software).
The ETF’s share price has jumped 63% over the past five years.
One risk here is tariffs (yes, those still). Fact is, the market appears to think they’re in the rear-view mirror, but their impact probably hasn’t even started yet. A global economic downturn would likely reduce capital expenditure, including investments in automation.
The longer term looks brighter, though. Morgan Stanley Research estimates the humanoid robot market is likely to reach $5trn by 2050. “Adoption should be relatively slow until the mid-2030s, accelerating in the late 2030s and 2040s”, says analyst Adam Jonas.
Cybersecurity
Next, we have the iShares Digital Security ETF (LSE: LOCK). This one holds 111 firms that provide services designed to secure digital infrastructure. In simple terms, companies defending data, networks, and systems from cyber threats in our increasingly online world.
Top cybersecurity and security stocks here include Fortinet, Datadog, Palo Alto Networks, Cloudflare, and Okta. The share price is up 68% in the past five years.
Now, one thing to note here is that the fund is denominated in dollars (each share is currently just under $10). So one risk would be the pound strengthening significantly against the dollar, which would impact returns.
Thematically though, it seems inevitable that cybersecurity spending will keep on rising. According to the Royal Institution of Chartered Surveyors, 73% of 8,000 UK business leaders expected their company to be hit with a cyber-attack in the next 12 to 24 months.
Nowadays, cybersecurity has become an absolute necessity rather than a luxury. And this bodes well for this ETF.
Defence
The final big trend is rising military spending by NATO members. Recently, they committed to spending 5% of GDP annually on defence over the next 10 years.
This brings me onto the HANetf Future of Defence ETF (LSE: NATP). It provides exposure to firms generating revenue from NATO defence and cyber defence spending.
Top holdings include AI software giant Palantir, Germany’s Rheinmetall, cybersecurity innovator CrowdStrike, and the UK’s BAE Systems.
Since launch in 2023, the ETF’s share price has rocketed 126%. This reflects the bullish sentiment around defence stocks.
That said, sentiment could quickly change if geopolitical tensions ease. Sadly though, we’re seeing more confrontation and less cooperation.
Meanwhile, there’s an unprecedented surge in cyberattacks, which will likely grow in sophistication and intensity in the age of AI.
Given this volatile backdrop, I think the Future of Defence ETF is set for further gains in the years ahead.
