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ETF Investing

4 Cannabis ETFs to Watch as Federal Legalization Creeps Nearer

Marijuana stocks are a hot ticket on the public markets these days. And while there are tons of new cannabis startups and large cap companies getting in on the “green rush,” there’s a lot of risk involved. As any good investor knows, one of the best ways to mitigate risk is to index. Enter cannabis ETFs.

There aren’t many cannabis ETFs out there yet, but there are a few with diversified holdings to mitigate some risk in this booming sector. If you’re planning on getting into cannabis stocks but aren’t set on any one company, you can give one of these four cannabis ETFs a try.

  1. Cambria Cannabis (TOKE)

The Cambria Cannabis ETF is one of the largest of the cannabis ETFs. It currently manages just shy of $8 billion in net assets, spread across 33 companies involved in various sectors of the cannabis industry. It’s the most diversified of the ETFs, touching everything from pure-play cannabis companies to those involved in growing, packaging, retail and more. Some of its largest holdings include…

  • Aurora Cannabis
  • Aphria
  • MediPharm Labs
  • Constellation Brands
  • Canopy Growth.

This fund is actively managed, meaning it comes with a 0.59% management fee. The downside? It’s relatively new (like the cannabis industry), and thus doesn’t have a great track record as of this writing. Since inception, it’s down about 13.72%.

  1. ETFMG Alternative Harvest (MJ)

Another of the bigger cannabis ETFs, ETFMG Alternative Harvest has just under a billion dollars in assets under management. This ETF is more focused on marijuana — specifically growing and harvesting. It has holdings spanning 37 companies and has the advantage of being the first cannabis-focused ETF on the public markets. Some of its largest holdings include…

  • Aurora Cannabis
  • Cronos Group
  • GW Pharmaceuticals
  • Canopy Growth
  • Tilray.

This fund has had its ups and downs since inception and is currently hovering around a -2.23% return. It’s also actively managed, with an expense ratio of 0.75%.

  1. American Growth Fund (AMREX)

Not a cannabis ETF outright, the American Growth Fund is a more conservative play on the budding cannabis industry. Its holdings are comprised of pharmaceutical companies, retailers, healthcare companies, technologies and industrials, all active within the cannabis space. Investors are likely to recognize some of its largest holdings by name…

  • GW Pharmaceuticals
  • Innovative Industrial Properties
  • Microsoft
  • Abbott Laboratories
  • Scotts Miracle-Gro Company.

This fund has been around since 2011 and has dabbled in various areas of agriculture. Over the past few years, its holdings have naturally trended toward cannabis, making this a sneaky play for those who aren’t quite ready to make a pure cannabis investment.

It’s a volatile ETF that’s up nearly 5% YTD in 2019, but has a history of ups and downs. And it has one major, glaring problem: a 15.17% expense ratio. Is it worth it for exposure to a collection of proven large cap companies?

  1. Horizons Marijuana Life Sciences Index (HMMJ)

We’ve saved what could be the best for last. The Horizons Marijuana Life Sciences Index is a collection of promising cannabis companies focused primarily on the healthcare sector. It offers great exposure to a mix of large cap companies and several promising microcap players, which gives it a mix of stability and room to run. Some of the assets under management include…

Since its inception, this stock has broken just about even, fluctuating above and below the profitability threshold. It has perhaps the best long-term outlook of the cannabis ETFs listed here, with a modest 0.86% expense ratio that won’t eat too much into investors’ profits.

Is a Cannabis ETF the Answer?

The cannabis industry is still highly volatile and subject to scrutiny. Cannabis ETFs provide a bit more stability than individual securities, but most of them are still young. They’ve got room to grow alongside the industry and are a great way to diversify your exposure for the future. If you’re a believer in the cannabis boom, you can pick one (or more) and see where it takes you.

To find more information on cannabis, check out our recent articles on marijuana stocks. You can also access our free e-letter by signing up below. It’s packed with investing insight.


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