Investing in Cannabis in the US and Canada has been a game-changer ever since the emergence of Cannabis ETFs.
Some of the best cannabis ETFs are MSOS, MJ, TOKE, YOLO, and THCX. These ETFs are the most promising form of cannabis ETFs. High in diversity, originality, and prospects for growth in the future, they have everything you need in a diversified portfolio.
While reading further, you will get a deeper understanding of Cannabis ETFs, their potential, and a detailed explanation of how to choose them.
What Is A Cannabis ETF?
A cannabis ETF, like any Exchange-Traded Fund, is a set of securities whose shares are traded on a stock exchange.
They incorporate the characteristics and future benefits of stocks, mutual funds, and bonds into a single product.
Cannabis ETFs are an easy way for investors to gain exposure to a diversified portfolio of cannabis stocks and benefit from the industry's rapid growth.
Buying cannabis stocks is like investing in a single company. Yet, a cannabis ETF is invested in a basket of cannabis securities.
Cannabis ETFs offer investors access to companies’ stocks involved in producing, distributing, and selling cannabis and related goods.
Some examples are dried flowers, oils, seeds, edibles, and many other products.
Cannabis is becoming more commonly tolerated for medical and recreational purposes, although it is still illegal in many parts of the world.
As support for continued cannabis legalization is increasing, cannabis has now become a multibillion-dollar industry.
Investing in cannabis ETFs enables investors to hedge against the risks associated with individual companies and to gain exposure to an entire industry with a single asset.
When you invest in a cannabis ETF, your money is pooled with other investors’ funds to purchase a basket of cannabis stocks or other assets focused on cannabis.
Note that cannabis ETF shares, like individual stocks, are exchanged during the day at varying rates based on supply and demand.
Best Growth Cannabis ETFs
With its 80% increase in 2020 only, Global X Cannabis ETF (POTX) is the best growth ETF on the market so far.
According to Investopedia, growth ETFs enclose a series of stocks from companies with rapid growth compared to other relatively undervalued stocks.
POTX aims to achieve investment results related to the price and yield performance of stocks rather than the fees of the Cannabis Index.
By investing a minimum of 80% of its assets, POTX targets to uplift exchange-listed companies from the cannabis industry.
Moreover, POTX investors are guaranteed a range of high growth potential cannabis companies and a performance surpassing the S&P/MX International Cannabis Index by 20%.
POTX analyzes emerging themes of the cannabis industry with its unrestricted approach instead of studying the sector and geographic classifications.
Top Cannabis Exchange Traded Funds To Invest In
According to Investment U, the top five ETFs to invest in 2021:
AdvisorShares Pure US Cannabis ETF (NYSE: MSOS)
MSOS is an actively controlled ETF dedicated uniquely to the U.S. cannabis industry, which is one reason MSOS makes it to the top of our list.
Since MSOS focuses primarily on the world's largest cannabis market – the United States – the opportunity is immense.
The MSOS equities are also well-diversified, which is another plus.
Cannabis manufacturers, dispensaries, pharmaceutical firms, and biotechnology companies are among its equities.
It also involves cannabis-focused real estate firms and producers of consumption equipment and growing systems using hydroponics.
Annual Dividend: NA
Dividend Yield: NA
ETFMG Alternative Harvest ETF (NYSE: MJ)
MJ is one of the biggest cannabis-related ETFs. It also gets additional consideration as it was the initial ETF to aim for the US market.
Its equities are among the most valuable in the cannabis industry in Canada.
Such examples are Tilray, Canopy Growth Corp, and Aphria, achieving profitability more rapidly than their counterparts.
The diversity of MJ's holdings, however, is what makes it so fascinating.
Agricultural products, growing products, and biotechnology are all covered by the fund.
It’s also well-known in countries like Canada, the United States, the UK, Japan, and Sweden.
Holders of medicinal Cannabis would prosper if the cannabis industry were to rise in some way.
Annual dividend: $0.58 per share
Dividend yield: 2.62%
Cambria Cannabis ETF (OTC: TOKE)
The Cambria Cannabis ETF is a newly emerging one. It compensates for its lack of experience in terms of value.
TOKE is known to be among the most affordable cannabis ETFs on the market.
Cambria’s Founder, Meb Faber, has always been considered a value investor in its traditional sense.
Furthermore, as TOKE is Faber firm’s only sector-specific investment, there are grounds to think that the sector is still undervalued for now.
Faber's views on the cannabis sector are unmistakable. The public's view of cannabis has changed.
TOKE Annual Dividend:$0.54
TOKE Dividend Yield: 2.69%
AdvisorShares Pure Cannabis ETF (NYSE: YOLO)
AdvisorShares Pure Cannabis is intended for those who choose to invest solely in cannabis.
It mainly invests in legal cannabis companies with a small to midcap cap across the globe.
Besides, the cannabis and hemp industries account for at least half of the revenue generated by each of YOLO's holdings.
YOLO Annual Dividend:$0.35
YOLO Dividend Yield: 1.54%
Cannabis ETF (NYSE: THCX)
THCX is a passively controlled ETF, on the contrary to others on the list. It has, however, a significant role in the cannabis industry.
THCX was created to provide investors an open door to invest in stocks that are most probably going to profit from the growing hemp and cannabis industries.
THCX even began paying dividends to shareholders as an additional benefit.
Although $0.87 per share does not seem like a considerable amount of money, the prospect of future expansion makes THCX ETF even more alluring.
THCX Annual Dividend: $0.45
THCX Dividend Yield: 2.33%
What To Look For In A Cannabis ETF?
There are a handful of items to look for in a cannabis exchange-traded fund.
We have broken down a few assets that a cannabis ETF can consider along with their benefits.
An ETF aiming for an appropriate market is considered a great advantage when looking for an ETF.
For instance, if a company has an excellent targeted market-such as in the US or Canada- it will almost guarantee future sales.
The likeliness of the company growing in the future is an important feature to consider.
The company’s future growth can be assessed by its number of holdings or dividends.
We should not disregard a possible expansion of the cannabis market.
Cannabis market growth can be in terms of the legalization of the cannabis market, which will tremendously increase the number of products sold.
It could also be in terms of diversity. Diversity can be from Agricultural growing of cannabis to manufactured products such as energy drinks.
If a given company is diversified, the company is more likely to make profits in the future, investing a considerable success eventually.
Should You Hand Pick Cannabis Stocks Or Buy Entire ETFs?
What we have observed so far is that betting on a single stock is a risky proposition.
The most significant advantage of purchasing a cannabis ETF over a single stock in a cannabis business is diversification.
When you purchase shares in an ETF, you are purchasing a stake in several cannabis companies all at once.
If the price of one of the underlying stocks falls, it would not necessarily ruin your entire investment, therefore, making it safer to buy entire ETFs rather than handpicking cannabis stocks.
About the author: Joe Powers
After an incident in the military, in 2011, Joe Powers began investigating cannabis by talking with industry leaders. In 2016, Joe launched Hemp Writer with its first publication in clarifying disinformation on specific updates to certain federal CBD laws.
Upon calling out a leading cannabis law firm spreading dis-info, Hemp Writer established itself as an authority in clarifying updated information emerging from the cannabis industry. Joe continues charging forwards with increasing momentum to continue fulfilling his vision of SHARING ACCURATE CANNABIS INFORMATION.