New Marijuana Investment Opportunities: Are they Safe?
“Is marijuana really a good investment?”
Once upon a time, this may have been a question asked by a broke college student. However, the medical marijuana industry has made so many strides in recent years that financial investors are starting to ask themselves this same question, particularly in Canada.
History was made this month, as the world’s first medical marijuana exchange traded fund, (known as the Horizons Medical Marijuana Life Sciences ETF) made its first appearance on Toronto’s Stock Exchange in early April. The fund is made up of 14 diverse companies relating to medicinal cannabis and synthetic THC production throughout North America.
The budding worldwide medical marijuana industry has undeniably raised a lot of interest from investors. Unfortunately, people in the United States may have some difficulty trading this ETF, and these risks and barriers are worth considering before investing.
The First Marijuana ETF: How We Got Here
The road to this ETF’s creation was hardly a smooth one, it faced (and continues to face) many obstacles. However, with the medical and even recreational marijuana industry’s explosion in recent years, many companies have emerged that appear to have long-term potential as investments. Now that many of these businesses are going public, it has clearly captured the attention of investors worldwide.
Nearly every investment strategy has an ETF (exchange-traded fund); consequently, it was probably inevitable that there would eventually be a “bona fide” marijuana ETF on the market. Still, it’s not without its detractors; many are unhappy with the makeup of the ETF, and others are extremely leery about its stability and prospects in the future.
Harnessing a Multi-billion Dollar Industry
With the relative success and novelty of medical and recreational marijuana in recent years, it should come as no surprise that many companies are trying to jump on board.
Some investors believe that medical, and increasingly, legal marijuana will continue to boom in the years to come as more countries and states pass legalization and decriminalization measures. The ETF would be a way to invest in the industry without putting any individuals or companies at risk.
Canada has a well-established medical marijuana industry, and legislation is in the works that would fully legalize cannabise use and possession for every Canadian adult. This also extends to three biotech firms who are creating synthesized THC (the active chemical in marijuana)
Interestingly, Scotts Miracle-Gro is also included in the ETF, which some see as a crass example of crony capitalism and a “large play” for fertilizer, disguised as an advancement in cannabis laws. It’s no mystery why so many corporations want in on this newly legal industry.
Marijuana ETF: Is it Smart for Individual Investors?
ETFs are widely considered to be one of the easier and better investment opportunities for individuals, especially those new to trading. They require lower fees, and have more flexibility regarding when you pay applicable capital gains taxes. Also, unlike mutual funds which settle once the market has closed, you can buy and sell ETFs at any time of day.
While investors in the United States may face certain difficulties investing in this Canadian ETF, for Canadian and other investors, the outlook is certainly promising.
What the Future Holds: Will the Industry Remain Steady?
While the popularity of cannabis as a product isn’t likely to decrease any time soon, the Trump administration has made public statements regarding more stringent enforcement of the United State’s marijuana laws as an investing tip. It remains to be seen what impact this might have on states like Colorado, Washington, California, Massachusetts, and others that have passed full-scale legalization measures.
Suffice it to say that the rules are still being written in this promising new industry. This groundbreaking ETF is a step in the right direction towards legitimizing the industry, as well as a boon for ancillary industries working with THC and hemp.