Investing in Marijuana ETFs

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    Cannabis is projected to be a $197.7 billion global market by 2028, according to Fortune Business Insights. The industry is expected to grow by a jaw-dropping compound annual growth rate of 32%.

    Investors have several ways to potentially profit from this tremendous growth. You could invest in specific marijuana stocks, but another alternative is to invest in exchange-traded funds (ETFs) that focus on cannabis.

    The main benefit of buying marijuana ETFs is that your money is spread across a basket of stocks, which can lower your risk compared to investing in only a few individual stocks. Here’s what you need to know about the top marijuana ETFs on the market.

    Top marijuana ETFs

    Below are nine top marijuana ETFs ranked by assets under management.

    ETF Assets Under Management Net Expense Ratio 
    AdvisorShares Pure U.S. Cannabis ETF (NYSEMKT:MSOS) $972.5 million 0.73%
    ETFMG Alternative Harvest ETF (NYSEMKT:MJ) $690.5 million 0.75%
    Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) $238.2 million 0.85%
    AdvisorShares Pure Cannabis ETF (NYSEMKT:YOLO) $147.8 million 0.76%
    Global X Cannabis ETF (NASDAQ:POTX) $78.1 million 0.51%
    Amplify Seymour Cannabis ETF (NYSEMKT:CNBS) $71.4 million 0.75%
    The Cannabis ETF (NYSEMKT:THCX) $58.8 million 0.95%
    Cambria Cannabis ETF (NYSEMKT:TOKE) $22.8 million 0.42%
    Cannabis Growth Fund (NYSEMKT:BUDX) $4.6 million 0.79%

    SOURCES: ETF WEBSITES.

    AdvisorShares Pure U.S. Cannabis ETF

    The largest marijuana ETF based on assets under management right now is the AdvisorShares Pure U.S. Cannabis ETF (NYSEMKT:MSOS). It’s the first ETF to focus exclusively on the U.S. cannabis market.

    AdvisorShares Pure U.S. Cannabis ETF currently owns 28 U.S. marijuana stocks. Its top holdings are Green Thumb Industries (OTC:GTBIF)Trulieve Cannabis (OTC:TCNNF)Curaleaf Holdings (OTC:CURLF)Verano Holdings (OTC:VRNO.F), and Cresco Labs (OTC:CRLBF). Together, these five U.S. multi-state cannabis operators make up more than 55% of the ETF’s total portfolio.

    It’s possible that this ETF’s concentration on the U.S. market could give investors greater growth opportunities than other ETFs. Although marijuana remains illegal at the federal level in the U.S., many states have legalized marijuana for medical and/or recreational use.

    ETFMG Alternative Harvest ETF

    In 2015, ETFMG Alternative Harvest ETF (NYSEMKT:MJ) became the first ETF to target the global cannabis market. This ETF was established even before the Canadian cannabis industry took off after the legalization of recreational marijuana in 2018.

    ETFMG Alternative Harvest ETF currently owns 35 individual stocks. Its top holdings include Aurora Cannabis (NASDAQ:ACB)Arena Pharmaceuticals (NASDAQ:ARNA)Canopy Growth (NASDAQ:CGC)Tilray Brands (NASDAQ:TLRY), and Cronos Group (NASDAQ:CRON). The five positions combined make up more than 31% of the ETF’s total assets.

    Canadian cannabis producers weigh heavily in the ETF’s portfolio. This could hurt the ETF’s performance while current U.S. federal cannabis laws remain in effect. The Canadian companies can’t enter the U.S. cannabis market and retain their listings on major U.S. stock exchanges as long as marijuana is illegal at the federal level.

    Horizons Marijuana Life Sciences Index ETF

    Although Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) isn’t listed on a major U.S. stock exchange, U.S. investors can buy the ETF on over-the-counter (OTC) markets. Its inception in 2017 makes it one of the oldest marijuana ETFs.

    This ETF holds positions in roughly 30 marijuana stocks. Its top holdings include Innovative Industrial Properties (NYSE:IIPR)Jazz Pharmaceuticals (NASDAQ:JAZZ)ScottsMiracle-Gro (NYSE:SMG), Tilray, and Cronos Group. Together, these five stocks represent more than 63% of the ETF’s total portfolio.

    Like all marijuana ETFs, Horizons Marijuana Life Sciences Index ETF is risky. However, its large positions in highly profitable companies such as Innovative Industrial Properties and Jazz Pharmaceuticals somewhat reduce the risks.

    AdvisorShares Pure Cannabis ETF

    AdvisorShares operates two marijuana ETFs. One focuses exclusively on the U.S. cannabis market, but the AdvisorShares Pure Cannabis ETF (NYSEMKT:YOLO) doesn’t limit itself to the U.S. Instead, it focuses on the global cannabis market.

    This ETF currently has 23 holdings. Almost 36% of its assets are invested in the AdvisorShares Pure U.S. Cannabis ETF. The top five individual stocks in its portfolio are Innovative Industrial Properties, Village Farms International (NASDAQ:VFF)TerrAscend (OTC:TRSSF), Tilray, and RIV Capital (OTC:CNPO.F). These stocks make up almost 44% of the ETF’s total holdings.

    The AdvisorShares ETF could be an attractive alternative to investors who want exposure outside of the U.S. but still want a heavier weighting to U.S. stocks.

    Global X Cannabis ETF

    Global X Cannabis ETF (NASDAQ:POTX) is operated by Mirae Asset, a financial services company based in South Korea. This ETF, as its name indicates, focuses on the global cannabis industry.

    There are currently 25 individual stocks in the Global X Cannabis ETF portfolio. Its top holdings include Sundial Growers (NASDAQ:SNDL), Aurora Cannabis, Cronos Group, OrganiGram Holdings (NASDAQ:OGI), and Canopy Growth. These stocks combined make up more than 43% of the ETF’s assets.

    This ETF is heavily weighted with Canadian cannabis stocks, which account for almost three-quarters of the portfolio. This could make Global X Cannabis ETF riskier than other ETFs with a higher percentage of U.S. stocks.

    Amplify Seymour Cannabis ETF

    Amplify Seymour Cannabis ETF (NYSEMKT:CNBS) bears the name of its manager, Tim Seymour. He is a well-known cannabis investor and has appeared frequently on CNBC’s Fast Money TV show.

    The ETF currently holds positions in 33 stocks. Its top holdings include Green Thumb Industries, Curaleaf Holdings, Trulieve Cannabis, Cresco Labs, and Tilray. Those five stocks comprise nearly 37% of the ETF’s total assets.

    U.S. marijuana stocks make up almost half of the Amplify Seymour Cannabis ETF. Most of the remaining portfolio consists of Canadian pot stocks, with a little more than 5% of assets invested in cannabis companies headquartered in Ireland and Israel.

    The Cannabis ETF

    The Cannabis ETF (NYSEMKT:THCX) began trading in July 2019. It focuses on stocks that could benefit from growth in both the hemp and legal marijuana industries.

    This ETF currently owns 29 stocks. Its top positions include Cronos Group, Village Farms International, ScottsMiracle-Go, Fire & Flower Holdings (OTC:FFLW.F), and OrganiGram Holdings. Together, these five stocks make up more than 26% of total assets.

    Probably the biggest knock against The Cannabis ETF is its relatively high expense ratio. However, some investors might like the fact that this ETF isn’t weighted as heavily among a few stocks as are some of the other marijuana ETFs.

    Cambria Cannabis ETF

    Cambria Cannabis ETF is operated by Mebane Faber’s Cambria Investment Management. Like The Cannabis ETF, it launched in July 2019.

    This ETF typically owns between 20 and 50 cannabis stocks. It currently holds positions in 35 stocks. The top holdings include Innovative Industrial Properties, Arena Pharmaceuticals, Constellation Brands (NYSE:STZ), Tilray, and ScottsMiracle-Go. The five stocks combined make up almost 42% of total assets.

    Although Cambria Cannabis ETF provides exposure to U.S. marijuana stocks, it doesn’t own any of the leading multi-state operators. However, it offers the lowest expense ratio of the top marijuana ETFs.

    Cannabis Growth Fund

    Cannabis Growth Fund is by far the smallest of the top marijuana ETFs. It’s operated by New Jersey-based Foothill Capital Management.

    This ETF currently owns 21 holdings. Its top position, reflecting 17% of total assets, is in AdvisorShares Pure U.S. Cannabis ETF. Cannabis Growth Fund’s top five individual stocks are ScottsMiracle-Gro, Village Farms International, cannabis-focused real estate investment trusts (REITs) AFC Gamma (NASDAQ:AFCG) and Innovative Industrial Properties, and Tilray. The stocks combine to make up more than 41% of the ETF’s portfolio.

    One key drawback to investing in such a small ETF is its lack of liquidity. The average trading volume for Cannabis Growth Fund is only a few thousand shares per day. The low level could make it harder for investors to sell at the desired price.

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