While there are a handful of cannabis-focused ETFs trading up in Canada, there’s only one so far in the United States. One of the Canadian cannabis ETFs, the Horizons Marijuana Life Sciences ETF (TSX:HMMJ) has an OTC ticker symbol (OTC:HMLSF) as well, but many U.S. brokerages charge additional commission fees for trades in foreign-listed securities. It is for this reason that most U.S. investors stick to U.S. ETFs.
Cannabis ETFs 101
An ETF, short for Exchange Traded Fund, is a free-trading security that tracks an underlying benchmark. Benchmarks can be an index like the S&P 500, the price of oil, or anything in between. In the case of cannabis ETFs, they track baskets of marijuana stocks rather than the price of marijuana itself.
Where as mutual funds like the marijuana-focused American Growth Fund Series II E (MUTF:AMREX) have limited liquidity and can only trade at the end of the day, ETFs trade like stocks from the market’s open until close. Through a process called creation and redemption, large financial intermediaries can increase or decrease the number of outstanding ETF shares based on market demand. Beyond that, most ETFs have far lower management fees than mutual funds.
As investor interest in the cannabis industry has grown, it comes as no surprise that ETF issuers have launched products to serve the demand. Thematic ETFs like these offer investors a way of gaining exposure to a wide variety of companies while minimizing commissions and maximizing convenience.
The Only Marijuana ETF on the NYSE
Looking at other thematic investment vehicles, we see tons of overlap. For example, there’s at least six different U.S.-based ETFs focused on the Aerospace and Defense sector alone.
Aside from the AdvisorShares Vice ETF (NASDAQ:ACT) which currently allocates just 20% of its assets to the cannabis sector, there’s only one pure-play marijuana-focused ETF listed in the United States.
ETFMG Alternative Harvest ETF – Intro
With $379,939,057 in assets under management as of July 13th, 2018, MJ is more popular than over 1,500 other ETFs on the market. That’s no small accomplishment given how many ETFs are fighting for investor attention.
With a fund objective to “provide investment results that, before fees and expenses, correspond generally to the total return performance of the Prime Alternative Harvest Index,” the ETFMG Alternative Harvest ETF holds major stakes in companies ranging from Canadian licensed producers of cannabis to companies with FDA-approved drugs based on cannabinoids.
This diversification within the broad-reaching marijuana space allows investors the opportunity for upside on the entire industry, rather than just one company or geographical region.
ETFMG Alternative Harvest ETF – Fees
ETFs charge management fees to cover the costs of re-balancing, compliance and more. Some ETFs have management fees of over 1%, making them nearly as costly as mutual funds. With a management fee of just 0.75%, MJ is an extremely cost effective way to gain exposure to the cannabis space.
ETFMG Alternative Harvest ETF – Holdings
With 39 different holdings, the fund covers a wide range of industry participants. Top holdings of MJ include:
- The Green Organic Dutchman Holdings Ltd.
- MedReleaf Corp.
- Cronos Group Inc.
- Canopy Growth Corp.
- Aurora Cannabis Inc.
- GW Pharmaceuticals Plc.
- Hydropothecary Corp.
- CannTrust Holdings Inc.
- Organigram Holdings, Inc.
- Auxly Cannabis Group Inc.
ETFMG Alternative Harvest ETF – Chart
ETFMG Alternative Harvest ETF – Prospectus
An ETF prospectus is a tell-all filing made to the U.S. Securities and Exchange Commission to provide all the vital details on a fund, its fees, its management, its strategy, and more.
That being said, if there’s anything you need to know about the ETFMG Alternative Harvest ETF that wasn’t covered in this guide, take a look at the prospectus here.
As more and more states and countries legalize marijuana for both medicinal and recreational purposes, we are certain that more cannabis-focused ETFs will pop up. In the meantime, its worth taking a deep dive into MJ to see if its right for you.
Remember to always do your own due diligence and consult your professional financial advisor, as this is not a recommendation to buy or sell any of the securities mentioned. Neither myself, MJobserver.com, or its affiliates are registered with any financial or securities regulatory authority, and does not provide nor claim to provide investment advice or recommendations to readers of this article.
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