Is this psychedelics-meets-cannabis ETF too good to be true? Here’s what we found…
As an investor, you can always expect to see quicker gains by owning individual companies as opposed to owning a basket of them in an exchange-traded fund (ETF).
I’ll show you what I mean. The chart below compares the performance of Tesla Inc. and Global X Autonomous & Electric Vehicles ETF (an ETF that has Tesla in its basket) over the last year:
You can see that Tesla owners are up 200% on their original return, enjoying the rapid growth opportunity presented by owning individual stocks. And if you’re anything like me, you’d much rather take the 200% return over the 73%.
But I know not every investor wants to put their money through the peaks and valleys of owning a company like Tesla. If they are more comfortable investing their money in the long-term growth of the electric vehicle sector, choosing the ETF over Tesla’s individual stock makes more sense.
The same holds true for investing in cannabis.
While the quickest gains will come from owning individual companies, a cannabis ETF can be a lower-risk option for investors still interested in profiting from the groundbreaking potential of the industry.
Which brings me to a new ETF that holds both cannabis and psychedelic stocks – the Defiance Next Gen Altered Experience ETF (NYSE: PSY).
The emerging psychedelics industry reminds me of the early days of cannabis, and with so many parallels between their legalization efforts, health benefits, and profit potential, I’ve been following this sector closely to find you moneymaking opportunities.
So when this ETF first debuted back in May, combining both cannabis and psychedelics stocks, I was excited.
It sounded promising.
But with an ETF, you always want to look under the hood to understand exactly what it holds.
Under the Hood With PSY
When I reviewed PSY, what immediately jumped out to me was the cannabis stocks included in this ETF.
Put simply, they’re not the stocks you want to own.
These are Canadian companies, and there’s a reason we typically recommend you stick to investing in cannabis operators in the United States.
Legal cannabis sales in Canada were $2.6 billion in 2020, while California alone topped $4 billion.
Total U.S. cannabis sales in 2020 were upwards of $17.5 billion – and it’s only legal for all adults in 18 states.
With all of this considered, I didn’t even need to look at the psychedelics companies included in this ETF. The promising growth of the emerging psychedelics industry will be too watered down by the direction in which the cannabis companies in the PSY are headed.
That being said, you can still maximize your returns from individual psychedelic companies – especially with this list of 23 psychedelics stocks that my colleague and Silicon Valley insider Michael Robinson thinks could jump 1,000% in 12 months.
And when it comes to ETFs, I already found one that looks much more promising than PSY.
To your investing success,
Executive Director, National Institute for Cannabis Investors
One response to “Is “PSY” a Buy? We Checked “Under the Hood” of This Cannabis & Psychedelics ETF Play to Find Out If It’s Worth Your Money”
November 02 2021