ETFs provide easy access to a basket of cannabis stocks, but here’s what you really need to know…

Because more are popping up, I wanted to talk today about exchange-traded funds (ETFs), specifically in the cannabis sector.

An ETF is a fund that owns a basket of stocks, commodities, or bonds. There’s pretty much an ETF for anything that you can think of, ranging from tech ETFs to dividend ETFs.

ETFs are similar to mutual funds because they allow investors to have broad access to a bunch of companies, but there’s a key difference. An ETF differs from a mutual fund in that ETFs can be bought and sold throughout the day, while an investor can only either buy or sell a mutual fund at the end of each day.

And one recent example of a cannabis ETF is the recently launched Pure Cannabis ETF, trading on the NYSE under the symbol “YOLO.”

YOLO is trading for about $25, while one of its holding, Innovative Industrial Properties Inc. (NYSE: IIPR) – which happens to be the only dividend-paying cannabis stock – is trading around $85 per share.

The seemingly cheaper price of an ETF compared to an individual stock is attractive to a lot of retail investors.

But before adding YOLO or another ETF to your portfolio, I’m going to pull back the curtain and show you what’s really going on with this type of investment.

Today, I’m going to talk about the good, the bad, and the ugly of cannabis ETF investing…

Cannabis ETFs 101

There are two kinds of ETFS: passive and active.

With a passive ETF, new stocks are added to a portfolio, usually according to a fixed formula. The advantage of owning this kind of ETF is that the fees are very low.

A passive ETF is fine if it owns stock of companies in a mature sector, like railroads or food manufacturers.

But for the cannabis industry, there is no purpose for a static ETF.

This type of ETF does not adjust to changes in the marketplace, and it can take a long time for a company to be added or removed from the portfolio.

Company A makes a major misstep? Too bad. It might not be removed from the ETF until next quarter. Company B made some great moves and should be in every investor’s portfolio? Again, too bad. It won’t be added until those running the ETF have their next meeting.

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To counter this issue of a lack of timely investing, there are also active ETFs. This is where someone with financial training selects stocks and trades them as he or she sees fit. Of course, you’re going to have to pay a management fee.

The YOLO ETF I mentioned earlier has a management fee of 0.6%.

That isn’t a lot, but one of the biggest disadvantages with owning an ETF is that you are stuck with all of the companies in the portfolio. If you’re particularly excited about CBD companies or companies building a presence in California, you have to go along for the ride with everything else that is in that ETF.

And if you just like certain companies to begin with, you are better off buying individual stocks.

This is a personal belief, but ETFs also limit your investing education and experience. You won’t learn anything from putting your money into a fund and just looking daily, weekly, monthly, or quarterly to see if the price has moved up or down.

The Bottom Line on ETFs

If you want exposure to the cannabis sector, understand the fees involved, and aren’t particularly interested in learning about investing, an active ETF might make more sense than buying individual stocks.

But if you’re interested in the opportunity to beat general market returns and want to become a more educated investor, buying individual stocks is the way to go.

Whether it’s through the information we present in Cannabis Profits Daily, Cannabis Insider’s Report, Cannabis IPO Insider, NICILytics, or through some other resource you’ve found helpful, I hope you are feeling more confident with your cannabis investing skills.

I also hope that, thus far, you’ve been able to cash in on some of the themes we’ve talked about, like when I said back in January that 2019 would be the Year of CBD. I thought that this was so important that I even had my staff put together a free CBD guide.

Most recently, you’ve seen me write a lot about why the Canopy Growth Corp. (NYSE: CGC) acquisition of Acreage Holdings (CSE: ACRG, OTC: ACRGF) is such a big deal. If you missed what’s going on, the acquisition will only close when cannabis is legal in the United States.

I don’t have a crystal ball, but this tells me that full cannabis legalization in the U.S. is going to happen a lot quicker than most people realize. Canopy didn’t make this deal with the expectation of waiting for it to close in 5 or 10 years.

This is a sign they think it will happen very soon.

If there’s ever been a time to be a cannabis investor, it is right now.

Greg Miller
Executive Director, National Institute for Cannabis Investors

P.S. Our experts have identified as many as 42 potential millionaire-making IPOs hitting in the next 90 days. Four of these will go public by May 15, so you only have a handful of days to discover how you could get 200%, 500%, even 1,000% gains. You’ll find everything you need to know here.


Comments

24 responses to “What You Really Need to Know About Cannabis ETFs”

  1. I’m an honest man and will tell you that our database is exactly all that I needed to go out and pick the very best and only the best. Nicilytics is by far the best investing tool in my arsenal and my go too for vetting. ETF’s are good if you don’t have anything in mind as far as understanding of stock selections. The real profits are in picking great individual stocks.

  2. Thank you for the brief education on ETFs.
    Some of us are retiredand INVESTING part time, do not have a lot of money, but finding this market commodity very interesting.
    Bob H.

  3. Thanks for explaining why E.T.F.s are limiting upside in the Cannabis sector. Looking forward to seeing Cannabis becoming legal in the U.S. and truly feel more will benefit from it then any harm it will cause.

  4. Can you provide some insight on the Origin House merger. For those of us who have profits in Origin, can you go through the pros and cons of selling Origin and buying Cresco outright vs holding and being issued shares in the coming merger?

  5. I believe in a bright future for cannabis, but am concerned about the effect of a major stock market downturn. How do you see cannabis affected by a major stock market downturn, and how should we protect ourselves?

    • Michael,
      Most intelligent question so far on NICI! You will hear something like
      “Check with your financial advisor, or, depends on your risk tolerence”, etc.
      I’m all in, but only 2% or less of my portfolio as I am a couple of years away
      from retirement. Can’t recoup large loss as time is not on my side. We
      are in a late cycle of the second longest bull market in history, unemployment
      is less than 4% and a dovish fed. However, US is 23 Trillion $ in debt, and
      GDP is very low. Trump himself said he inherited a market that is on a
      bubble, and 2 years later the bubble is much bigger. I’m not a chart monkey,
      and have been taking profits. Dan Brody said April is a good month to
      update positions and that is what I did. A friend who is a finance professor
      said that recessions occur every 7 to 9 years, and it has nothing to do with
      elections, geopolitical fears, alien invasions, but simply supply and demand.
      Greg has been giving good guidance. I am up thanks to Greg and NICI,
      but very selective in the best companies. But I have to very carefull on what
      and how much I buy. I hope they don’t delete this post. By the way, a low
      unemployment rate of less than 4% has preceded every recession. You
      can make a good profit even in a bear market, and cannabis is a great place to be, even if Warren Buffett is against it. Good luck! George

  6. Thank you for your insight regarding ETF’s. When I first joined you all
    I came across MJ (Alternate Harvest) in one of the reports online I was reading about Canopy Growth. I looked into MJ and saw they held
    a few of your recommendations. At the time it was selling for about $28 so I bought a few shares and now every paycheck I pick up another share or two as a long term investment. So far this has been quite successful as it is hanging out around $35 now.
    This is a conservative approach and I also add to other of your positions in this manner – or if you have a new reco I jump into that with more than a few shares. It all depends on price.
    Thanks for all the insight. Its going to be a sweet ride me thinks!
    Cheers, jeff hansen

    • I second what u just said Jeff. We’re very blessed to have Greg and NICI team in our corner. Thank u so much Greg for this ETF summary. I did not even know what ETF stands for until I read this post. Have a great day everybody!

  7. Morning Greg how are you today/ I hope today can be the start of great news for us at NICI. We are now into May and I am truly hoping some real great returns start to manifest itself in our two portfolio. Thank you for touching on how ETFs work and the difference between that type of investing and what we do. Like I said to you before Greg I think your great in my mind you are the Professor of Cannabis. I know this is a subscription service, but to me I am in school learning about an industry that I find fascinating. Being taught by one of the best Professor!!!!! Words cannot express my gratitude and appreciation for you and your team. Thanks for all your teaching and I hope you have a great day. Much success to all of us in the future!!!!

  8. Please provide some stock performance history from IPO to present of the most recent IPO cannabis companies u recommended.so I / we can judge if your more expensive IPO subscription is as profitabel as u claim. Some testimonials from those acting on that subscription would go a ways in reassuring us as well with details such as what time and at what price they were able to buy in to these shares and what broker they used.
    Thanks,
    Rick Chaney

  9. Good afternoon I’m trying to invest in this stock . Please help don’t have any idea which to choose. I need to start small and build up 500 is my start . Please help

  10. Fair article above. For some investors, an ETF is the correct choice. For some investors, individual company(s) is(are) the correct choice.

  11. So far I have made a lot of money investing in Cannabis stocks, that shows you have done a great job of picking the good ones. Bill Rogers. I have more than paid my fees. Thank you.

  12. Hi Greg,
    First, I want to thank you for all your excellent work and due dilligence in helping the novis investor navigate this life changing green industry. I’m learning lots thanks to you and very excited about opportunities in the horizon! Still too… new for success stories, but definitely will share when they happen.
    Q: once Cannabis is legal in the US, and corporate giants jump in with fierce vigor, what impact will this have on current NICI IPO Member Investors, and our stock investments? In other words will the giants drive stock prices so… high that selling, and purchasing will become difficult for your members? Also their impact on those joining NICI?
    Cheryl

  13. I have not been able to time an IPO properly I am in nz so times are different. what’s my best plan

  14. PS,
    Thank you about the inside scoop. ETFs move too slow, and they can be volatile. I have tried them, got out even, then joined NICI. Doing much better with individual companies, Greg’s analysis, NICI rating scale, and
    daily texts…read them all! George

  15. I bought Acreage Holding when they launched their IPO. I do not see how the Canopy deal will be beneficial in any way. Do YOU?

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