It’s important to know what’s in the ETF you’re buying…
After our report on a new cannabis ETF being listed on the London Stock Exchange (LSE), a lot of our members said they wanted to learn more about exchange-traded funds (ETFs).
Executive Director Don Yocham also received a question about ETFs in his recent Facebook Live Q&A video session.
ETFs are similar to mutual funds, but they are easy to buy and sell, just like stocks. You can use your brokerage account, look up the name of the ETF, and then you can add it to your portfolio.
It is as simple as that.
There are ETFs that exist for almost anything you can think of, from tech stocks to emerging markets.
However, as Don notes in his Q&A session, most ETFs are just meant to give broad exposure to a market, and adding or removing companies from the ETF may take longer than some investors prefer.
And if you don’t know how to look up what companies are in the ETF, you won’t know exactly what you’re buying.
How to Access ETF Holdings
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The goal of the fund is to “Measure the performance of companies within the cannabis ecosystem benefitting from global medicinal and recreational cannabis legalization initiatives.”
What that means is the ETF is holding companies that will make money from cannabis, no matter if it’s recreational or medical.
To find the page for the fund, you just need to type in “Alternative Harvest ETF” into Google, which will lead you here. You can do that for all ETFs.
Once on the page, click on the “Basket” section.
Scroll down on the page, and it will show you the top holdings.
You can see that, as of February 6, one of the top holdings was Canopy Growth Corp. (NYSE: CGC). The other names on that list are probably familiar as well – especially for our Cannabis Investor’s Report Lifetime members, who have complete access to earnings reports, shares outstanding, growth potential, and more for over 200 cannabis companies.
But one that you may be wondering about is British American Tobacco.
British American Tobacco sells some of the most recognizable brands of tobacco products in the world – Pall Mall, Camel, Lucky Strike, and Newport, just to name a few.
But over the past five years, the British American Tobacco stock price has dropped around 20% while the Dow Jones Industrial Average is up over 50% during that same time.
To turn things around, British American bought a 45% stake in Cronos Group Inc. (Nasdaq: CRON).
Here’s the problem – if you don’t want to own a tobacco company, it’s one of the largest holdings in the Alternative Harvest ETF.
And what if Cronos underperforms?
Not only do you have Cronos dragging things down, but British American is tied to the success of Cronos by almost owning half of the company.
We aren’t picking on just the Alternative Harvest ETF here, but we just wanted to show you a prime example of why it’s so important to look at all of the holdings.
You need to know how all of the pieces work together.
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February 12 2020