Getting into investing, especially in the cannabis industry, can be intimidating. It might even put some people off. But that won’t stop people from trying. Note that the adult cannabis use market is projected to have a retail value of $ 4.1 billion by the end of 2021, according to CIBC analysts. (1)
Why the cannabis industry?
There are many different options to choose from, so choosing which stocks to buy can be confusing. Options include Canadian cannabis stocks, US stocks, and other stocks internationally. There are also options between recreational cannabis and legalized medical cannabis.
However, let’s get one thing straight about the stock market. There are no guarantees in this seemingly lawless country. There are just as many ways to make money as there are to lose money. So remember to always be careful when investing in the cannabis industry.
What are ETFs?
This is where an exchange traded fund (ETF) comes into play. One way to minimize the risk associated with investing in individual stocks is to invest that money in an ETF instead. ETFs help investors by exposing them to the entire industry, especially one that expects double-digit growth for the rest of the decade.
What is an ETF? ETFs are a type of mutual fund or security that can hold and track several different assets or even other securities. ETFs are similar to mutual funds, except that ETFs can be traded on exchanges throughout the day. There are even some ETFs that can be structured to have different investment strategies.
Horizons Marijuana Life Sciences Index ETF
Let’s talk about marijuana ETFs. A Canadian ETF called the Horizons Marijuana Life Sciences Index ETF is currently trading on the Toronto Stock Exchange. This ETF primarily focuses on the medical cannabis scene, perfect for anyone looking to get into the medical side of things.
Horizons has over 40 holdings in fund assets with a variety of different companies. These include medicines, cultivators, and plant fertilizers. Although Horizons has over 40 holdings, seven companies make up over 60% of the ETF. These companies are Aphria, Canopy Growth, and Cronos to name a few.
AdvisorShares Pure Cannabis ETF
Let’s take a look at the example of another ETF, the Pure Cannabis ETF from AdvisorShare. It is traded on exchanges under the ticker YOLO and is the first actively managed cannabis ETF. YOLO focuses on small to mid-cap stocks that range from domestic to foreign stocks. Examples of the stocks held are HEXO and OrganiGram Holdings.
Good news as an investor
The thing about marijuana ETFs is that most of the top ETFs that can be found share the same holdings for the most part. This is due to the fact that there aren’t many publicly traded companies involved in cannabis products.
In any case, the growth potential of individual stocks remains. Cannabis ETFs minimize the risk of individual stocks while also providing insight into potential stocks that could take off. And remember, marijuana stocks should be part of an investment portfolio – diversify where possible.