March 5th, 2021
News, Top News
Cannabis stocks rebounded nearly 700% from their all-time lows in March 2020 to their highs in February, driven by a combination of robust fundamentals and increasing retail investor interest in the space. Following in the footsteps of the cannabis industry, psychedelics have also taken off as researchers embrace their potential to revolutionize mental health treatments.
While picking individual stocks can be risky in these volatile industries, exchange-traded funds, or ETFs, provide diversified exposure in a single liquid security. You don’t have to worry about building and maintaining a portfolio from scratch nor do you need enough the thousands of dollars necessary to buy a stake in hundreds of different stocks.
Let’s take a look at three cannabis and psychedelics ETFs that you can use to build exposure to these high-growth industries into your portfolio—the easy way.
#1. The Cannabis ETF (THCX)
- Performance: 60.23%*
- Expense Ratio: 0.7%
- Dividend Yield: 2.14%
The Cannabis ETF offers the lowest expense ratio and the highest dividend yield in the cannabis space, making it an attractive option to income investors or those looking to minimize expenses. With exposure primarily to North American markets, the fund is heavily weighted to pharmaceutical and biotech sectors with a blend of value and growth.
The ETF’s top holdings include Aphria Inc. (8.42%), Amyris Inc. (6.99%) and Village Farms International Inc. (6.88%) with 31 holdings in total.
Full disclosure: CFN Enterprises Inc. (OTCQB: CNFN), parent company of CFN Media and CannabisFN.com, is part owner of Innovation Shares LLC, issuer of The Cannabis ETF.
#2. Psychedelic Stock Index ETF (PSYK)
- Performance: N/A*
- Expense Ratio: 0.85%
- Dividend Yield: N/A
The Psychedelic Stock Index ETF is the first (and currently only) ETF offering exposure to the nascent psychedelics industry. With exposure across North America, the company invests in both U.S. and Canadian publicly traded life science companies that have significant business activities in, or exposure to, the psychedelics industry.
The ETF’s top holdings include Seelos Therapeutics Inc. (10.46%), Field Trip Health Ltd. (8.89%), and Numinus Wellness Inc. (8.84%) with 17 holdings in total.
Note: The Psychedelic Stock Index ETF is traded on the NEO stock exchange in Canadian dollars. Performance data isn’t available due to its recent launch.
#3. AdvisorShares Pure U.S. Cannabis ETF (MSOS)
- Performance: 34.59%*
- Expense Ratio: 0.74%
- Dividend Yield: 1.33%
The AdvisorShares Pure U.S. Cannabis ETF is unique in that it provides exposure to only the U.S. cannabis market. In addition to its 80% exposure to multi-state operators, or MSOs, the fund also invests in real estate investment trusts, or REITs, CBD-focused businesses, supporting services and pharmaceutical companies focused on cannabinoids.
The ETF’s top holdings include Trulieve Cannabis (10.78%), Green Thumb Industries (10.76%) and Curaleaf Holdings (10.26%) with 32 holdings in total.
How to Choose the Right Option
Exchange-traded funds provide an easy way for investors to gain exposure to specific industries. In the case of cannabis, they are particularly useful given the volatility of individual stocks and the fact that many of them are traded on non-U.S. stock exchanges.
When determining the right option for your portfolio, it’s a good idea to weigh the exposure you want (e.g., broad cannabis vs. U.S.-only) and the expense ratios and strategies for each fund. Expense ratios can have a significant impact on returns over the long-term since you miss out on the impact of compounding on the fee amounts.
The three ETFs we’ve covered above provide exposure to the broad cannabis industry, psychedelics and U.S.-only cannabis companies.
* Year to date daily total return per Yahoo! Finance as of March 5, 2021.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.