BUZ INVESTORS World’s First Marijuana ETF Viva la revolución! That’s the slogan jubilant potheads are raising in Canada, as the country is officially going to become the second in the world to legalize recreational marijuana. By July of next year, weed lovers in Canada will freely puff joints. But they are not alone in the celebration. There are thousands of those who invested in marijuana stocks and are now watching their investments multiply. But if you missed the boat earlier, fate is once again knocking at your doors, because we have just been given the first ever marijuana ETF!
Potential investors in the U.S. and Canada have been anxiously waiting to see which way the winds blow for weed legalization before getting into the pot craze. Now that Canada has given it a green signal and many U.S. states are likewise considering legalization, many of us feel ready to set sail. The only problem that remains is to figure out the directions to the right marijuana stocks to watch right now.
Prices have tripled and even quadrupled for marijuana stocks, and it’s natural for us to feel jumpy. Frankly, nobody likes to overpay. But for those of us who feel we’re late to the party, this new opportunity could be a game changer for our portfolios.
It’s okay if you’re new to investing and wondering; “What the heck is an ETF?” Let me make it easy for you. An Exchange-Traded Fund (ETF) is the fraternal twin of a mutual fund. It is similar in essence but different on the face of it.
Like a mutual fund, an ETF pools together different investments into a single fund. So an investor who doesn’t have the time or knowledge of analyzing individual investments can simply buy a fund and forget.
The HMMJ ETF tracks the North American Medical Marijuana Index, which includes 16 top medical marijuana companies in the U.S. and Canada. Now Horizons’ Marijuana ETF constitutes most of these stocks, but not all of them. So, it aims to replicate the performance of the index, plus earn an alpha. In layman’s lingo, alpha is the extra return over the index return.
You may now be wondering why someone would consider buying a passive ETF when they could have a mutual fund manager actively trading for them instead. For lower fees, duh! Mutual fund fees charge much higher fees, usually in excess of two percent of invested funds.
Here is the list of all the companies included in the ETF.
Aurora Cannabis Inc
Insys Therapeutics Inc
|Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE)||9.35%||U.S.A.||
|Canopy Growth Corp (TSE:WEED)||9.07%||Canada||Scotts Miracle-Gro Co (NYSE:SMG)||8.9%||U.S.A.|
|GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH)||8.66%||U.S.A.||Cronos Group Inc (CVE:MJN)||7.98%||Canada|
|Organigram Holdings Inc (CVE:OGI)||5.75%||Canada||CanniMed Therapeutics Inc (TSE:CMED)||5.33%||Canada|
|Supreme Pharmaceuticals Inc (CNSX:SL)||4.52%||Canada||Emblem Corp (CVE:EMC)||4.44%||Canada|
|ICC International Cannabis Corp (CVE:ICC)||2.87%||Canada||Emerald Health Therapeutics Inc (CVE:EMH)||2.72%||Canada|
|Hydropothecary Corp (CVE:THCX)||0.76%||Canada||Cash||0.24%||—|
It’s evident that all the major marijuana plays have been duly given weight in the ETF, albeit many of them are penny stocks. Also note that there are quite a few U.S.-based marijuana companies, yet Canadian marijuana stocks dominate the ETF. The two factors may add to the risk of the ETF.
Now, no investment is ever 100% safe. So this marijuana ETF is no exception. But roughly speaking, an ETF diversifies your risk across various securities instead of exposing you to one or more individual securities.
On the same lines, it makes sense for a marijuana ETF to be a safer play compared to most marijuana stocks in this exceedingly speculative industry.
The legal medical marijuana industry is already a multi-billion-dollar industry that generated over $6.0 billion last year in North America alone. The impending legalization in Canada and many states in the U.S. will likely kill marijuana’s illegal black market. In turn, that money will also start flowing to the legal marijuana companies.
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