Despite some dips in the market, textile stocks have significantly improved over recent years. At the end of 2022, the Bombay Stock Exchange (BSE) noted that textile firm AK Spintex had hit a multi-bagger 190% return to its shareholders. Furthermore, AK Spintex’s share price has shot up by 260%, from ₹21.55 (US$ 0.26) to ₹80.90
(US$ 0.99) apiece levels— statistics that align with the expanding apparel market.
Across the world, the sales of all kinds of clothing have bounced back. In India, fashion and apparel account for over 20% of the country’s total online retail sales in 2021, with experts estimating spending will rise from ₹4.09 trillion (US$50 billion) to ₹11.47 trillion (US$140 billion) over the next two to three years. This significant increase is mainly due to the shift to online shopping, which has enabled millions of buyers to purchase at their convenience. Considering their considerable success, it’s unsurprising that the industry is a go-to security for many traders and
investors.
Why trade and invest on the S&P 500?
However, rather than buying individual stocks, investing in apparel brands under an index may be more worthwhile. Individual stocks tend to be more volatile, as they rely on fashion trends that often come and go and can be heavily influenced by the economic environment and consumer needs.
For instance, more consumers are now looking for businesses that practice sustainability. People are consciously choosing environmentally friendly options which have longer lifespans. Furthermore, they are also looking into transparency and ethical practices and using this knowledge to determine brands to stay loyal to. To remain relevant, it’s essential for brands and businesses to cater to these shifting needs. However, fast fashion remains a common concern in the industry, with plenty of companies exposed for unsustainable and unethical practices— potentially leading to boycotts, a drop in sales, and lowered company value. In contrast, an index would feature several apparel brands, so dips or fluctuations among individual stocks won’t affect its overall performance.
For greater stability of assets, it’s worth investing in one of the most well-known and well-used indices— the Standard & Poor’s 500 Index (S&P 500). This index comprises several sectors and industries, serving as one of the best gauges of American equity performance. In particular, the Textile, Apparel & Luxury Goods
Industry has seen relatively stable consumer demand and easing supply chain pressures.
Tapping into the S&P 500 index
As an index, S&P 500 cannot be traded directly but can be invested in through a mutual fund or exchange-traded fund (ETF). Fortunately, ETFs like the Vanguard 500 ETF are available on most trading platforms, so investors can tap into indices trading and diversify their portfolios. An investor’s trading strategy will determine whether they focus on a range of fundamental factors, such as economic news releases and geopolitical events, or make more extensive use of various technical analysis tools like Fibonacci retracement or moving averages.
Challenges of investing in apparel brands under the S&P 500
Although the S&P has seen a positive performance in the past few months, much of this increase was driven by the returns of tech giants such as Apple, Microsoft, Amazon, and several others. Amazon is considered one of the largest consumer discretionary stocks by the S&P, meaning that the index performance strongly relies on other companies across industries rather than apparel brands alone. For passive investors, this makes tracking other businesses aside from fashion brands all the more important due to differences and index imbalances.
Apparel and clothing have generally fared favorably compared to most sectors over the past years. Furthermore, the continual demand for clothing, such as sportswear and other fashion trends, makes them reliable for trading and investment. The S&P 500 is a great vessel for tracking positive gains, but traders and investors must also remain alert to other industries that can affect the index.
