Marijuana ETFs are a new and quickly developing entry into the ETF marketplace. Typically, marijuana ETFs do not invest in local dispensaries or mom-and-pop growers. Instead, cannabis ETFs tend to invest in the pharmaceutical and biotech companies doing cutting-edge research into medical applications for cannabinoids. They also tend to supplement their marijuana exposure with companies that support the budding marijuana industry, such as fertilizer producers; and alcohol and tobacco firms that have made significant investment into future marijuana revenue streams.
Though pot is still illegal at the federal level, more than half the states in the U.S. have legalized medical marijuana, and eight states, including California, have legalized recreational marijuana. Most issuers of marijuana ETFs, however, take pains to only hold in their funds companies that are federally legal or that are domiciled in foreign countries, such as Canada. Still, pot ETFs may carry significant legal risk, should the U.S. Justice Department follow through on plans to federally prosecute marijuana companies that are legal on the state level.
This channel is designed to help you understand how marijuana ETFs work, how they are built, how they behave, and what their risks and rewards are, so you can decide whether marijuana ETFs belong in your portfolio.
With 9 ETFs traded on the U.S. markets, Marijuana ETFs have total assets under management of $3.22B. The average expense ratio is 0.70%. Marijuana ETFs can be found in the following asset classes:
The largest Marijuana ETF is the ETFMG Alternative Harvest ETF MJ with $1.40B in assets. In the last trailing year, the best-performing Marijuana ETF was CNBS at 92.30%. The most recent ETF launched in the Marijuana space was the AdvisorShares Pure US Cannabis ETF MSOS on 09/01/20.