The campaign for the federal legalization of cannabis in the United States has been marked by both advances and setbacks. So far, 38 states have approved medical marijuana. Marijuana is legal for recreational use in 19 states, the District of Columbia, and Guam, and the U.S. House of Representatives passed legislation in April to legalize marijuana at the federal level for the second time in less than two years. Despite the fact that two-thirds of Americans now claim to support legalization, the Senate has struggled to muster a majority for either of these measures.
The legal wrangling around cannabis creates ambiguous profit prospects for investors. Many investors are currently sitting on the sidelines, unsure of how the cannabis business will evolve or even its current state.
Tim Seymour, portfolio manager of the Amplify Seymour Cannabis ETF, believes “the asset class itself, from an investor’s standpoint, is very comparable to developing markets” for these reasons (CNBS). Similar to investing in emerging markets, cannabis investing is characterized by high growth and risk. In addition, there is a lack of liquidity and “significant restrictions on investment in the area,” he explains.
Despite these obstacles, nine marijuana-related exchange-traded funds (ETFs) are trading in the United States. In addition, these ETFs have $1.2 billion in total assets under management. But that’s only a minor portion: The current value of the worldwide cannabis market exceeds $25 billion, and it is projected to reach $176 billion by 2030. This represents a compound annual growth rate (CAGR) of 23.9 percent over the past decade.
What Is The Best Approach To Investing In Marijuana Stocks?
To become a successful cannabis investor, adhere to these seven steps:
1. Recognize the different types of marijuana products.
2. Understand the various types of marijuana companies.
3. Recognize the risks associated with investing in the marijuana industry.
4. Understand what to look for in leading marijuana stock.
5. Assess the leading cannabis stocks and ETFs (ETFs).
6. Invest in your favorite cannabis companies.
7. Monitor the dynamic evolution of the marijuana industry.
Which Marijuana Stocks and ETFs Are Worth Looking at More Closely?
ETFs covering cannabis companies are a practical method for investors to capitalize on the potential of the marijuana market. AdvisorShares Pure US Cannabis ETF (MSOS) is the largest, with $533 million in assets under management and a 0.73 percent cost ratio. Trulieve Cannabis Corp. (TCNNF) and Curaleaf Interests Inc. are its largest holdings (CURLF).
Roundhill Cannabis ETF (WEED), which debuted in April 2022 and has an AUM of $1.8 million and an expense ratio of 0.59 percent, is a new investment choice. Additionally, it owns Trulieve and Curaleaf.
When evaluating cannabis ETFs, investors should examine holdings in addition to fees. According to Seymour, not all cannabis companies are pure bets, as some also own tobacco, medicinal, and alcohol businesses.
In the current market environment, these sectors may assist enhance the performance of particular ETFs, but investors interested in purchasing an ETF comprised entirely of marijuana plays should examine the fund’s underlying holdings first.