Why Do Some Sunrise Sectors Underperform — and How to Invest in Them Smartly

What is the fuss?

Investors follow themes. They often chase emerging industry sectors with tailwinds. Expectations of faster-than-GDP growth, which can yield disproportionate rewards, are enticing.

Themes are simple to understand. These stories sound convincing on the surface, drawing professional and retail investors alike. But some of these themes don’t play out the way they were supposed to. They give lower or sometimes negative returns, testing investors’ patience and leaving many to abandon the theme and move on.

In this edition, I give examples of two sunrise sectors where the investment thesis did not play out as expected.

These are my learning experiences. I was swayed by the simple and convincing stories spun around these two sunrise sectors, put in my money, and was disappointed with the outcome after three years of waiting.

Towards the end, I provide a framework that can help you decide which sunrise sector story is solid, and which is not.

Let's get started.

Example 1: Insurance Sector

The Story

Insurance penetration in India is just 4%, compared to the Global…