Legal marijuana is a growing and evolving market since the time the District of Columbia and 29 US states legalized it. The use has been legalized primarily for medical purposes and in some states it is also legalized for recreational use. Since it happened, the sales of legal marijuana are on an increasing trend. It is expected that by the year 2021, it would touch somewhere around $24.5 billion.
When the consumption of physical marijuana is on the rise, the marijuana ETFs are also making their impact on the stock exchanges. Those who do not want to deal with physical stuff and still participate in the marijuana story can buy marijuana ETFs (Exchange-Traded Fund). While the year 2017 was in the name of cryptocurrencies, it’s time for some crazy performance of cannabis stocks.
Lots of investors out there – both novice and experts – have minted money taking the route of marijuana ETFs. Many new funds have emerged and the investors need to do some research to get into the right fund as these funds are showing diverging performances with some outperforming the others.
There are some funds that have large-cap names in their portfolio, while there are others that focus on smaller pure growers. Those ETFs that have been focused on smaller growers have still not performed to their potential. This is because the small growers have not succeeded in receiving the desired investment or partnership with large beverage or alcohol companies.
There are also ETFs where the investors can have exposure in not just U.S.-based players but the Canadian players as well. Thus, if you want to take the benefit of both the US and the Canadian weed market, it’s better to go for ETFs, which have exposure in both.
Again, the AUM (Assets Under Management) of the ETFs is also important. Funds having high AUMs to the likes of $450 million and more are more stable in the market. Though they will be impacted by the federal pot policy, it will not be to the extent the smaller players will get impacted. It is like buying a large-cap fund against the small-cap, which can wipe off your capital also in times of turmoil; forget about the profits.
Not all investors have the same risk profile and based on your risk profile and attitude, one should pick a fund that is best for him or her.