The cannabis exchange-traded fund is outperforming all others
Cannabis exchange-traded funds (ETFs) continue to be seen as a practical possibility to easily diversify investment and reduce the natural risk of the stock market. ETFMG Alternative Harvest ETF (MJ) announced its market launch in late 2015. This made MJ the first cannabis-focused ETF listed in the US. That obvious industry expertise has many investors setting their sights on it, as its performance is looking increasingly promising.
There is no doubt that MJ sets itself apart from other competitors in some important ways and deserves the attention of anyone interested in this type of investment. With over $314 million in assets, MJ is the second-largest and most liquid ETF in the market. It is also considered a passive ETF that tracks the Prime Alternative Harvest Index.
The firm’s primary focus is on making investments in companies that generate the majority of their revenue from growing marijuana or manufacturing marijuana-related products, such as cannabinoid-based prescription drugs. Generally, these organizations will have a higher individual weighting. Collectively, these will comprise the majority of the MJ portfolio.
On the other hand, MJ also has a secondary criterion for investing in companies that are ancillary to the industry but that, in some way, will see their revenues grow because of their relationship with the plant. Regardless of whether a company participates directly in the industry, all MJ holdings must meet minimum market capitalization and liquidity requirements. In other words, MJ works only with innate talent, those companies that demonstrate incredible value.
Unlike many other cannabis ETFs that focus only on companies directly related to marijuana, MJ takes a broader approach by including companies that are likely to be influenced and benefit from cannabis legalization initiatives taking place both domestically and internationally. As such, investing in an ETF like this is seen as a sound strategy now that 2023 has reached its second month.