Best Cannabis ETFs Right Now

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Contributor, Benzinga
Updated: November 18, 2021

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Marijuana is gradually shedding its outlaw past to emerge as a popular investment commodity. As its barriers to legitimacy continue to fall, marijuana’s growth potential increases. Eleven U.S. states plus Washington, D.C. have legalized marijuana for recreational use. New York Governor Andrew Cuomo promised to make New York the 13th state to take advantage of a mega-million dollar tax windfall. 

Benzinga introduces you to 3 of the best cannabis ETFs. First, be aware of some key elements of investing in marijuana ETFs. 

Cannabis ETFs Biggest Gainers and Losers

The surge in marijuana stocks’ notoriety comes with a major caveat — volatility. Last year, cannabis shares took a steep climb after Canada opened its legal recreational marijuana market. The ascension was brief — it ended with marijuana stocks losing most gains. This experience gave many investors the need to diversify in the high-risk marijuana sector.

Cannabis exchange-traded funds (ETFs) can give the diversity your holdings will need to endure the drastic up and down swings in this market. They can also give you broad exposure to many of the most promising cannabis-related businesses’ major capital outlay. 

Keeping track of the biggest gainers and losers in the marijuana ETF market can give you a good idea of where your cannabis ETF stands. Online brokers and financial media constantly publish updated gainer and loser lists to aid investors in making better decisions. These lists are useful sources for an ETF.   

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Premarket Cannabis ETFs

The after-hours market is very different from regular trading hours. There is less transparency, trade volume is low and volatility is high. However, you may want to act on new information about your ETF before the market opens. Buying premarket may give you an advantage. But be careful, the premarket is a den for the pros. 

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Aftermarket Cannabis ETFs

There is much less trade volume in the aftermarket, making it more volatile. An extreme market downturn could artificially drive down cannabis ETF prices. You may realize major short-term profits or recoup on losses by purchasing some good cannabis ETFs during the aftermarket. 

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Why Invest in Cannabis ETFs?

There are 3 great reasons to invest in cannabis ETFs:

  • Diversification: Your prosperity doesn’t have to rely on the fate of a few companies. Cannabis ETFs mean you can dilute your risks and benefits from the overall performance of all the marijuana stocks in the fund. Getting this much diversification by any other means would cost you a lot of investment capital. 
  • Low maintenance: Cannabis ETFs are great for novice investors. They get exposure to a fast-growing industry without requiring the trading dexterity of a seasoned investor. Once you buy the ETF, there’s no need to do watch them as much as you would with individual stocks.
  • Good long-game move: If you’re a buy-and-hold investor, cannabis ETFs give you the opportunity to take a long-term position capable of withstanding the volatile marijuana market. 

3 Cannabis ETF(s) by AUM

The best way to evaluate a cannabis EFT is by its net assets under management (AUM). ETFs with the highest investment capital can dominate over ETFs with low AUMs. These 3 cannabis ETFs can give you an advantage in this sector. 

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1. ETFMG Alternative Harvest ETF (MJ). This ETF holds the distinction of being the first U.S. ETF to concentrate on cannabis-related businesses. Its scope is global and holds shares in businesses with ties to the legal cultivation, processing, promotion and distribution of cannabis products. It doesn’t matter whether the products are medical or nonmedical. 

This ETF also holds shares in companies that offer cannabis-related products including fertilizer, pesticides, plant food and other marijuana-cultivating supplies. Alternative Harvest adds to its diversification by holding stocks in pharmaceutical companies that develop, promote and distribute drugs with cannabinoids in them.

Alternative Harvest’s current AUM is $616.5 million. Its expense ratio (ER) is 0.75%. Over the past 2 years, its earnings have been in the red. Current indicators show it has the potential to return to its 2017 form.

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2. Horizon Marijuana Life Sciences ETF (HMMJ). Horizon is a Canadian ETF provider with a majority of its holdings in companies primarily earning revenue from cannabis processing, distribution and sale. Since it has a Toronto Stock Exchange listing, U.S. investors can only buy it on the over-the-counter (OTC) market. The family-oriented ETF has 20 more holdings than Alternative Harvest. However, 7 of those holdings are responsible for more than 65% of the fund’s total assets. 

Horizon Marijuana Life Sciences offers exposure to the outcomes of a good collection of publicly-traded North American companies with a direct connection to the marijuana industry. These companies rank high among the cannabis cultivation, fertilizer and pharmaceutical stocks. Horizon’s AUM is $386.2 million. Its ER is 0.75%. So far, this ETF hasn’t produced positive returns.

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3. The Cannabis ETF (THCX). Normally, an ETF with an $18.95 million AUM would not be near the top of the heap in most stock market sectors. But The Cannabis ETF fits well among the leaders in the marijuana market. This is mainly due to its rapid rise over the past few months. Over this time, it’s accumulated over $17 million in assets. 

It’s less than 1 year old and the creators of The Cannabis launched this fund as an easy vehicle for average investors to get more exposure to the cannabis market. This cannabis ETF dedicates its assets to legal marijuana-related companies only. It doesn’t offer as much diversification as other cannabis ETFs. 

The Cannabis has an industry norm ER of 0.75%. This is an attractive investment for investors who believe the growing legal marijuana industry is going to ascend to new heights in the near future.

Best Online Brokers for Cannabis ETFs

Many investors traders use online brokers to buy cannabis ETFs. It’s an affordable way to research your potential choices, execute trades and track your investments. Here are 3 of the best online brokers for buying and tracking them.

TradeStation – Online Broker – ONL-TRA-INVE-2737
Best For
  • Futures Trading
securely through TradeStation – Online Broker – ONL-TRA-INVE-2737's website

1. TradeStation

TradeStation offers $0 trades on ETFs. With a $500 minimum deposit, you can use TradeStation’s award-winning web, desktop or mobile platforms to strategically enter into the cannabis ETF market. It provides all the tools you need to develop and automate your cannabis ETF investment strategy. If you feel uncomfortable immediately launching your strategy, the platforms offer simulated trading.

After-hours $0 ETF trading is available through TradeStation. It offers premarket and after-hours sessions. Your equity account automatically qualifies for the sessions so there’s no need to fill out forms. 

Firstrade
Best For
  • Mobile Investing
securely through Firstrade's website

2. Firstrade

Firstrade provides $0 trades and a $0 minimum deposit. You can use Firstrade’s full range of trading services to trade your cannabis ETFs. It offers a thorough research section that features cannabis market news and analysis from Benzinga Pro and other financial media.

Its trading dashboard has customizable screeners, charts and indicators. You can take advantage of early or late information about your cannabis ETF with Firstrade’s extended-hours trading — premarket and after-hour sessions are available. 

TD Ameritrade
Best For
  • Options Trading
securely through TD Ameritrade's website

3. TD Ameritrade

TD Ameritrade offers the same $0 ETF trades and $0 minimum deposit as Firstrade. Its trading services are peerless. TD Ameritrade’s thinkorswim is a professional-level platform that features the most advanced technology in the industry. The ETF Center functions as an excellent cannabis ETF trading center. It offers a fund comparison tool, CFRI analyst picks and customizable screeners. 

The desktop and mobile thinkorswim platforms have limited 24/5 extended $0 ETF trading. Other ETFs must be on TD Ameritrade’s after-hours trading list. 

Should You Invest in Cannabis ETFs?

The cannabis market sector is highly volatile but its growth potential is exciting. More U.S. states are moving toward marijuana legalization. The U.S. legislature may follow suit in the near future. Cannabis ETFs provide a way to secure a diversified, long-term position in the volatile and promising marijuana market sector.

Spanish version, “Cómo Invertir en Acciones de Cannabis” on ElPlanteo.com.