A look at how to invest in cannabis ETFs

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For those still unsure about cannabis investments, exploring ETFs is a solid option

Although the cannabis industry is growing steadily, with legal sales in the billions of dollars in recent years, stocks of companies in the space have proven to be much more volatile than expected, especially in recent times. In this context, cannabis exchange-traded funds (ETFs) emerge as a practical possibility to easily diversify investment and reduce the natural risk of the stock market. An ETF is a type of security that tracks an index, sector, commodity, or another asset, but which can be purchased or sold on a stock exchange the same as a regular stock.

Currently, several large cannabis ETFs are traded on major stock exchanges. Among them, some even trade on the New York Stock Exchange, such as ETFMG Alternative Harvest ETF, AdvisorShares Pure Cannabis ETF, Cannabis ETF and Amplify Seymour Cannabis ETF. These ETFs are undoubtedly one of the largest to watch, especially given the growth they have shown in recent years.

Investing in ETFs makes it easy to invest in cannabis stocks that have already been pre-screened by teams of analysts who have also conducted the relevant research and decided to include certain companies in these ETFs. Before investing and considering cannabis ETFs, it should be noted that actively managed ETFs keep up with a dynamic market. This indicates that they are a pretty good option for those who don’t want to follow the earnings of cannabis companies or face some of the federal issues and political dynamics that the industry is currently facing.

Also, remember that there are active and passive ETFs. Passive ETFs are dedicated to tracking an index. This keeps management costs low, but in turn, limits the upside potential. On the other hand, active ETFs are dedicated to selling and buying stocks based on their own criteria, with the objective of increasing the profits produced by the fund. This activity means a higher management cost but can provide a higher return for the investor. Management costs are deducted from the fund’s net asset value and are not charged separately.