Best cannabis ETFs to buy in 2024

By:

Charlie Hancox

Charlie is a Financial Writer for Invezz. He covers commodities, cryptocurrencies, and breaking news. Prior to joining Invezz he helped grow Crux Investor into the fastest-growing... read more.

Updated: Oct 11, 2022

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The cannabis industry has become an immensely popular growth sector as the drug has become more socially acceptable. With more political support for legalisation in the United States, weed ETFs offer a great way to profit from the entire industry’s growth. Look out for the top options below and find out what makes these ETFs a good investment.

What are the top cannabis ETFs to buy?

Our team of financial analysts have been through each marijuana ETF with a fine-tooth comb, reviewing every aspect of what they have to offer to investors. You can find our selections in the table below, along with links to key price information.

1. The Cannabis ETF (NYSEARCA: THCX)

The aptly named Cannabis ETF follows an index of companies involved in both the medical and recreational cannabis industries. The fund was designed as a convenient way for investors to gain exposure to a basket of stocks within the hemp and legal marijuana markets. 

All of THCX’s holdings are based in the United States and Canada, and they follow a mixed blend of growth and value stocks. That means there are some stable investments alongside those with a higher risk:reward ratio. Its top holdings are Tilray, Canopy Growth, and Village Farms International. 

The main reason The Cannabis ETF is on our list is the strength of its holdings and its strategy of diversification. In recent years, it has produced solid performances and includes a greater than 1% dividend yield to sweeten the deal. 

2. Amplify Seymour Cannabis ETF (NYSEARCA: CNBS)

CNBS is an actively managed Cannabis ETF, which means fund managers buy and sell stocks within the ETF in an effort to provide returns to investors. At least 80% of the companies within the Amplify Seymour Cannabis ETF are pure-play cannabis companies that achieve 50% or more of their revenues via the cannabis and hemp sectors.

CNBS has performed well in recent years, and its primary holdings include Tilray, Canopy Growth, Village Farms International, and WM Technology. Most of the CNBS portfolio resides in North America and Canada, though there is an Israeli component to the fund as well. 

The sheer growth of CNBS and its blended approach of mid-cap and small-cap companies are attractive. It offers a balanced investment to different parts of the sector and that is why it has found a place in our top 5. 

3. AdvisorShares Pure Cannabis ETF (NYSEARCA: YOLO)

The YOLO ETF tracks Canadian and U.S. companies in the healthcare, real estate, and consumer products sectors, and it is heavily weighted toward mid-cap companies. Like CNBS, a minimum of 80% of the companies that comprise the YOLO fund obtain at least half of their net revenue from the cannabis and hemp business. 

Within the AdvisorShares Pure Cannabis ETF, there are also some companies based in the United Kingdom and Israel. The holdings within YOLO are diverse, featuring pharmaceutical players, biotechnology companies and agricultural entities. Importantly, YOLO is an ETF engineered for the long term, making it an ideal candidate for a buy-and-hold strategy. 

While this ETF’s solid performance is part of the reason it is on this list, the main reason is the sheer level of variety within its basket of stocks. Just take its top three holdings: Village Farms International, Innovative Industrial Properties, and Green Thumb Industries. The first is a grower of tomatoes, cucumber, bell peppers, and Cannabis; the second is a Cannabis-focussed REIT, and the third is a manufacturer and distributor of branded cannabis products. 

4. ETFMG Alternative Harvest ETF (NYSEARCA: MJ)

Launched in 2015, MJ is the largest Cannabis fund on this entire list, with around $2 billion in assets under its management. It tracks the performance of the Prime Alternative Harvest Index, which was created to allow investors to capitalise on both event-driven news and long-term trends in the cannabis industry.

While MJ only holds around 30 stocks, they are some of the biggest names in the Cannabis space such as Tilray, Canopy Growth and GrowGeneration. In addition, this fund has a high annual turnover, which is a testament to the work of the fund managers who regularly flip stocks to create both income and dividends. 

The key reason the ETFMG Alternative Harvest ETF is on our list is its sheer scale and the proactiveness of its fund managers. Scale offers security, as the more money in the fund, the less likely it is that a sudden outflow could force it into selling stocks at an inopportune time, while a proactive manager can seek out the best opportunities as soon as they arise.

5. Cambria Cannabis ETF (BATS: TOKE)

The TOKE ETF has anywhere from 20 to 50 of the top marijuana players within its portfolio, and its performance has been steady in the last few years.

Its top four holdings are Tilray, Innovative Industrial Properties, Constellation Brands, and British American Tobacco, and these form part of a blended focus consisting of micro-, small- and mid-cap stocks. With 80% of its net assets invested in Cannabis companies, TOKE is a fast and easy way for investors to gain exposure to the performance of a wide basket of weed equities. 

The main reason the Cambria Cannabis ETF has found a place on this list is its level of diversification. Its holdings are some of the most varied on this list, making it better equipped to cope with the pressures of market volatility.

Where to buy the best Cannabis ETFs

If you want to invest in a Cannabis ETF, finding a reliable, low-fee broker is key; these are the online ETF platforms that facilitate your trades for you. To save you some time and effort, rather than you having to scour the internet for hours to find a high-quality service, we have listed our top picks below. Click on one to check it out and see what it has to offer.

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What is a Cannabis ETF?

A Cannabis ETF is an exchange-traded fund (ETF) that features companies participating in the cultivation, distribution, or sale of marijuana and related products. This can include the dried flower itself, as well as seeds, edibles, oils, and more. 

An ETF is a fund that trades on a stock exchange like a normal stock. However, a single ETF consists of multiple stocks from the same industry, in this case, cannabis stocks. This means that holding an ETF gives you exposure to the performance of an entire sector rather than a single company.

Because your investment is diversified between different stocks, you do not have the single-company risk that comes with investing in a solitary stock. So, should one company within your chosen ETF perform poorly, others may make up for it. 

Are Cannabis ETFs a good investment?

They can be, but only if you keep your expectations in check and recognise that the market has historically overvalued weed companies. Take Tilray, one of the largest weed stocks. For a brief period, it shot up to a $20 billion valuation – the same as aviation giant, American Airlines. However, Tilray was only generating $200 million in annual revenue, while American Airlines was bringing in $45 billion. 

While weed has been legalised in an increased number of countries and North American states, it remains illegal for recreational use in most jurisdictions. Moreover, its classification by the DEA for much of the past century as a Schedule 1 drug alongside damaging substances like Heroin has damaged its reputation. 

However, there are some reasons to be positive about the prospects of this industry and some consider that they’re one of the best ETFs to buy. Notably, a greater number of countries and states now recognise the potential benefits of medicinal marijuana. In addition, the growth of the market should be taken into consideration: over 12% of Americans now use Cannabis, while sales and support for the industry have surged in the past year as it edges towards a $100 billion valuation.