Are these the best cannabis and marijuana ETFs to watch?

Cannabis ETFs: what you need to know

In 2019, the global cannabis industry was worth $12 billion. In 2021, it was worth $37 billion. By 2040, it is estimated to hit $630 billion.

So far at least 23 countries – and 37 US states – have legalised medical uses of marijuana, and an increasing number of governments are decriminalising its recreational use. That, plus widespread use of derivatives such as cannabidiol (CBD) oil, makes cannabis a compelling proposition for traders.

It’s little wonder, then, that forward-thinking traders are turning their attention towards marijuana stocks. Cannabis exchange traded funds (ETFs) offer exposure to a variety of companies at once, which makes them a great alternative to individual stocks for traders who want exposure to the marijuana market.

Some fear, though, that the high valuation of cannabis stocks may be a bubble that is set to burst. High demand for marijuana stocks has seen values as much as 85 times above earnings. This has created a potent mix of expectation and fear, which could lead to significant volatility in the future.

So is the marijuana market set to ramp up, or wind down? There are two ways to take your position with IG: investing or trading.

Cannabis ETF investing

With cannabis ETF investing, you’re buying a share of the fund itself. So you profit if the fund increases in value and you sell your share, or if it pays a dividend. Most ETF investors take a medium- or long-term view.

You can invest in ETFs with us by share dealing.

When you open an IG account, you can choose whether you want to trade CFDs, spread bet or deal shares – or you can choose all three.

Cannabis ETF trading

With cannabis ETF trading, you’re speculating on the price movements of ETFs without buying into the funds themselves. This means you can go long if you think a cannabis ETF is set to increase in price, or short if you think it will go down. Most ETF traders take a short- or medium-term view. You can trade ETFs with us using CFDs or spread bets.

Learn more about how to buy or trade ETFs

Best marijuana ETFs to watch

1. Han Med Cannabis UCITS ETF (CBDX)
2. Rize Med Cannabis UCITS ETF (FLWR)
3. ETFMG Alternative Harvest (MJ)
4. Advisorshares Pure Cannabis (YOLO)
5. IG’s Cannabis Index*

These are the top ETFs you can trade with IG, based on the assets they track. All holdings are correct at time of writing.

* The Cannabis Index is an index, not an ETF

Han Medical Cannabis and Wellness UCITS ETF (CBDX)

HanETF’s Medical Cannabis and Wellness ETF is the first cannabis ETF to launch in Europe, which means it is also the first UCITS-compliant marijuana fund.

CBDX holds businesses involved in both the cannabis and CBD industries. Just four companies make up over 50% of CBDX’s total weight: Corbus Pharmaceuticals, Scotts Miracle-Gro, Innovative Industrial Properties and GW Pharmaceuticals. So if any of these stocks make major moves, it can have a significant effect on the ETF overall.

You can invest in CBDX via share dealing, or go and short on its price movements with CFDs or spread betting – simply open an account to get started. Because CBDX is listed on the London Stock Exchange (LSE), you won’t have to pay a currency conversion fee to trade.

Rize Medical Cannabis and Life Sciences UCITS ETF (FLWR)

Rize's ETF invests in the global cannabis life sciences industry, focusing on marijuana-derived medical and wellness products. It was created in conjunction with New Frontier Data, an independent cannabis research firm.

Like CBDX, FLWR is heavily weighted towards four companies. GW Pharmaceuticals, Scotts Miracle-Gro, Arena Pharmaceuticals and Cara Therapeutics comprise more than 60% of its total holdings. It is also listed on the LSE – so you can trade it with no currency conversion fee – and you can invest in it with an IG share dealing account.

ETFMG Alternative Harvest (MJ)

LARE-US was the first exchange traded fund in the US to focus on the global marijuana sector. It's also the largest cannabis ETF you can currently trade, holding $726 million in assets. That’s over four times the size of the rest of this list combined.

MJ tracks the Prime Alternative Harvest Index, which comprises of 38 companies in both the medicinal and recreational cannabis industries. MJ's top holdings are Canopy Growth, GW Pharmaceuticals, Tilray, Cronos Group and Aurora.

You can trade on MJ’s price movements with CFDs or spread betting. Open an IG account to get started.

AdvisorShares Pure Cannabis (YOLO)

Like all AdvisorShares funds, the Pure Cannabis ETF is actively managed, meaning a portfolio manager – currently Dan Ahrens – oversees its asset allocation. It was the first such cannabis ETF to launch in the US. YOLO claims that the fast asset adjustments that come with an active strategy are key to investing in this often-volatile market.

YOLO’s top five holdings are Innovative Industrial Properties, GW Pharmaceuticals, Valens GroWorks, Village Farms and Corbus Pharmaceuticals. Together, they make up a little over 40% of the fund’s total assets.

Like MJ, you can trade YOLO using CFDs or spread betting. Or you can trade it via a demo account if you’re not ready to risk any capital.

The IG Cannabis Index

IG's Cannabis Index isn’t an ETF – instead, it’s our index of 20 constituent marijuana stocks. Like an ETF, it enables you to get exposure to a group of cannabis stocks. But it doesn’t trade on an exchange, and it isn’t a fund.

The Cannabis Index captures the gross total return performance of the 20 largest listed cannabis companies in the US and Canada. The index is calculated and managed by BITA GmbH.

The Cannabis Index is exclusive to IG, so you can go long or short on it using an IG trading account. Because it isn’t an ETF, you don’t have to put down as much margin to trade the Cannabis Index. Our minimum margin for ETFs is 20%, compared to 10% for the index.

How to start trading or investing in cannabis ETFs

1. Decide whether you want to trade or invest in cannabis ETFs. Trading means you can go long or short on ETF prices without owning shares in the funds themselves. Investing means buying a stake in your chosen funds
2. Open a trading account to go long or short on ETFs, or a share dealing account to invest in them
3. Fund your account and open your first position

Would you rather try out trading ETFs without risking any capital? Open a demo account to buy and sell our full range of markets, risk free.

Cannabis ETFs aren’t the only way to get exposure to the marijuana industry. Learn more about our cannabis index, or how to trade cannabis stocks.

Cannabis ETFs summed up

• Cannabis ETFs can be a great way to get exposure to several marijuana businesses at once
• The biggest fund by some distance is ETFMG’s Alternative Harvest
• ETFs on the LSE don’t require any currency conversion fees
• You can trade ETFs with CFDs or spread betting, or invest in them via share dealing