Though the use of cannabis for medicinal use is still considered illegal by the U.S. federal laws, a significant beneficiary of the marijuana industry is the healthcare sector. With more companies moving from marijuana cultivation for recreational use to medical usage, there’s an increased demand for healthcare or psychedelic stocks and exchange-traded funds (ETFs) among marijuana investors.
These companies use cannabis, especially cannabinoids, to create medicines, execute research, and innovate unique healthcare solutions that can transform the world. They also double as solid investment opportunities for marijuana enthusiasts. We highlight the best psychedelic stocks and ETFs in this guide.
Key Players in the Psychedelic Cannabis ETF Market
AdvisorShares Pure US Cannabis ETF (MSOS)
When thinking of the best-performing psychedelic stocks to buy in 2023, medicinal cannabis companies like:
- Curaleaf Holdings (CURLF)
- Trulieve Cannabis (TCNNF)
- Green Thumb Industries (GTBIF).
These are among the most reputable names in the U.S. healthcare industry, with a focus on the medicinal uses of cannabis.
Interestingly, you can invest in these psychedelic stocks individually or combine multiple stocks with different positions in one basket through the AdvisorShares Pure US Cannabis ETF (MSOS). The psychedelic cannabis ETF has the largest combination of US-only marijuana stocks for cannabis enthusiasts looking to invest in the best collection of medicinal stocks dominating the US markets.
Though the ETF is down by 0.73% year-to-date (YTD), it is one of the most valuable cannabis ETF options on the US Stock Exchange, at a current trading price of $6.82. In other words, you can consider the AdvisorShares Pure US Cannabis ETF if you’re looking for marijuana investment opportunities under $10.
AdvisorShares Pure Cannabis ETF (YOLO)
Another variety of stock options to combine when thinking of investing in healthcare stocks include:
- Tilray Brands (TLRY)
- Village Farms International (VFF)
- High Trade (HITI)
- Jazz Pharmaceuticals (JAZZ)
- Innovative Industrial Properties (IIPR).
These top-rated marijuana companies offer various products and services aimed at solving medical challenges with marijuana and its associated medicinal components, including cannabinoids.
These stocks offer significant potential returns individually, but the AdvisorShares Pure Cannabis ETF (YOLO) offers a pot stock basket with up to 24 holdings, including the brands mentioned above, to investors. In other words, if you wish to invest in global brands instead of only marijuana companies in the US markets, you should opt for the ETF.
You can combine various stocks from the US and other countries in one basket and spread your funds across all the stocks at the same time. Doing so comes with fewer risks compared to investing in individual stocks of each company. The YOLO ETF is on the market for only $2.59 at the time of writing.
ETFMG Alternative Harvest ETF (MJ)
While the stock and ETF options from AdvisorShares focus majorly on the US and global marijuana markets, the ETFMG Alternative Harvest ETF (MJ) is best suited for investors who want access to the best Canadian marijuana stocks and ETFs.
The ETF was one of the earliest to pave the way into the global marijuana stock market and combine various stocks from the Canadian market with the general global market as far back as 2015. So, suppose you’re looking to invest in brands like:
- Tilray Brands (TLRY),
- Canopy Growth (CGC)
- Chicago Atlantic Real Estate Finance (REFI)
- Cronos Group (CRON)
- and other 30+ psychedelic stocks.
In that case, the ETFMG Alternative Harvest ETF (MJ) is a viable option.
However, it’s crucial to note that the stocks that make up the ETF are majorly from the Canadian marijuana market, which may result in exchange listing issues on the New York Stock Exchange (NYSE) – since the US government prohibits Canadian marijuana businesses from operating in its markets.
Similarly, realities from the Canadian markets may affect the overall ETF value. MJ sells for $3.10 at the time of writing, making it a good choice for low-capital or beginner cannabis investors.
ETFMG U.S. Alternative Harvest ETF (MJUS)
With a history dating back to 2001, the ETFMG U.S. Alternative Harvest ETF (MJUS) is a relatively new marijuana ETF on the market. As the name implies, the ETF is for investors looking for stock options from the best-rated psychedelic companies in the US.
Interestingly, ETFMG offers an ETF with 29 such cannabis brands, including options like:
- Green Thumb Industries (GTII)
- Curaleaf Holdings (CURLF)
- Verano Holdings (VRNOF)
- Trulieve Cannabis (TCNNF)
- Innovative Industrial Properties (IIPR).
In other words, if you are looking to invest in other renowned US cannabis companies in the healthcare space without the options from AdvisorShares, the ETFMG MJUS is a perfect option for you. The ETF is currently priced at $1.61, and it also extends its investments into short-term US treasury bonds, offering investors high yields from its bond profits.
So, the ETFMG U.S. Alternative Harvest ETF is a decent option for beginners looking for investment opportunities with low entry barriers.
Horizons Marijuana Life Sciences Index ETF (HMMJ)
The last option on our list of the best psychedelic stocks to consider this year. is the Horizons Marijuana Life Sciences Index ETF (HMMJ). The ETF combines options from 27 marijuana healthcare companies, including:
- Cronos Group (CRON)
- Tilray Brands (TLRY)
- Jazz Pharmaceuticals (JAZZ)
- ScottsMiracle-Gro (SMG).
These brands are among the most prominent players in the healthcare industry, with a focus on cultivating, processing and researching cannabis for medicinal uses. However, while the stocks started trading at different times, the combined ETF began trading in 2017, so it was one of the earliest psychedelic marijuana ETFs and one of the oldest options around.
At the same time, the Horizons Marijuana Life Sciences Index ETF isn’t listed on any major US stock exchange. So, investors interested in it can only buy the shares using the over-the-counter (OTC ) market.
Currently, HMMJ is available for $6.29. So, it is a great psychedelic ETF option for investors across all levels.
Factors Influencing Cannabis ETF Performance
Though ETFs are less risky than individual stocks, they are not free from external influences. In other words, the performances of the best psychedelic stocks and ETFs can be determined by many factors. We highlight some of them below.
Legal Developments
The production and use of marijuana remain illegal at the federal level in the US. However, recent legal developments suggest that the industry may be on its way to being regulated at the federal level.
Some of these developments include the issuance of recreational dispensary licenses by states like New York and the federal cannabis offense pardons by the President Biden administration.
Market Trends
Another challenge facing the US cannabis market is its unstable market trends. Since the market is still evolving, demands fluctuate and can lead to oversupply. Therefore, stock prices can rise and drop from time to time and affect ETF performance.
Investor Sentiment
Due to strict regulations at the federal level and uncertainties about the government’s stance changing soon, there are mixed investor sentiments. Cannabis investments are highly risky, so risk-averse investors may opt for safer investment options.
Diversification and Risk Management in Cannabis ETFs
Marijuana ETFs are safer investment options than individual psychedelic stocks. However, healthcare cannabis ETFs have their fair share of risks because their positions are usually determined by major assets from top cannabis companies or producers.
For instance, AdvisorShares Pure US Cannabis ETF (MSOS), has producers like Curaleaf Holdings and Greenthumb Industries holding its biggest positions. In other words, the performance of these stocks individually will affect the entire ETF stock basket.
To mitigate risks, it’s advisable to combine different high-performing ETFs. That way, investors can cut across multiple companies’ stocks and hedge better against the constant market volatility.
For example, a US investor can opt for the AdvisorShares Pure US Cannabis ETF (MSOS) to invest in only US marijuana companies and the ETFMG Alternative Harvest ETF (MJ) for marijuana ETFs with stocks primarily from Canadian companies. That way, if the US market is not performing well, there’s a backup option in the Canadian market.
Future Outlook for Cannabis ETFs
According to Forbes, total sales in the budding US cannabis market could reach $50.7 billion by 2028. However, the current market reality is quite distant from the projected figure because the global cannabis industry is still evolving and shaping up.
Looking at the current reality and the future, it’s safe to say an exciting future lies ahead for the US and the global marijuana landscapes. However, many factors will determine how much growth the industry will potentially experience. These include friendlier regulations from the US government at the federal level and more states legalizing the production and consumption of marijuana in their jurisdictions.
Making an Informed Investment Decision
The marijuana industry is set to explode over the coming years, provided there are better regulations around the cultivation and consumption of cannabis products and services in the US. As such, investors are looking to maximize the available opportunities by finding the best psychedelic stocks and ETFs to buy.
We’ve reviewed the five best cannabis ETFs for healthcare enthusiasts this year. Reading through our review will help you find affordable investment options with optimistic outlooks. However, it’s important to research properly and find the perfect options for you and your taste before investing in any psychedelic stock or ETF.
Why You Can Trust The Marijuana Index
The information provided on Marijuana Index is solely for educational purposes. The selections presented here are the product of meticulous analysis by an experienced financial analyst. However, it’s crucial to remember that these choices may not universally fit every portfolio.
Before making any investment decisions, we strongly encourage you to conduct thorough research. This ensures that any potential investment aligns with your unique financial goals and risk tolerance.
As of the date this article was written, the author does not hold any positions in the stocks or ETFs mentioned.
We do not provide personalized financial advice, advisory services, or brokerage recommendations. Nor do we advocate for the purchase or sale of specific stocks or securities. Please be aware that performance information might have changed since publication, and past performance should not be seen as an indicator of future results.
Investing in cannabis stocks carries its own set of risks, reflective of the evolving legal landscapes and market volatility inherent in this industry. As an investor, it’s essential to be aware of these risks and consider them carefully in your decision-making process.
To understand more about our commitment, we encourage you to learn more about us. If you have more questions for our cannabis specialist editors, do not hesitate to contact us. You can also send us a tweet at @Marijuana_index. Stay updated with the latest cannabis news by subscribing to our Newsletter.
Tobi Opeyemi - Financial Writer
Tobi, a journalist and crypto writer since 2017, is renowned for his educational content in the digital currency realm. His journey includes a significant tenure with Stockbossup, an investment platform committed to enlightening the black community on financial matters. Before this, Tobi honed his skills as a copywriter at Turboxbt, a platform specializing in cryptocurrency trading. Notably, Tobi's insights are featured on Investopedia, where he contributes articles on a range of topics. He is also celebrated as one of the top web3 creators on LinkedIn, known for content that consistently drives engagement and sparks conversations in the industry. With a background in Pharmacy, he brings a unique perspective to his writing, especially in the Cannabis sector.
