There are roughly a half-dozen exchange-traded funds in the marijuana and cannabis space, including the first mover in the U.S., ETFMG Alternative Harvest ETF (MJ). But the fund's price and its underlying holdings haven't been moving in sync lately, the Wall Street Journal reported, drawing the attention of regulators.
The AdvisorShares Vice ETF (ACT) holds 20 percent pot stocks, and the rest in other "vice" holdings such as alcohol and tobacco companies.
Other ETFs trade only on Canadian exchanges, and access to retail investors may be limited depending on your broker, but include Horizons Marijuana Life Sciences Index ETF (HMLSF), Evolve Marijuana ETF (SEED), and the actively managed Marijuana Opportunities Fund (MJJ). Another U.S.-listed fund is in registration, with the symbol TOKE.
"Investing in these is completely speculative, and shouldn't be money you use for retirement savings," said Bloomberg analyst Eric Balchunas. "But if you see it as the end of Prohibition Part Two, then there's a strong case for owning these."
Use extreme caution when investing in small-cap companies that trade infrequently, "because they're not required to have the same financial disclosures," said Arcview's Downs.
"Even though they have a public listing in Canada, that doesn't mean they have revenue. There's no guarantee.
You'll see evaluations more aggressive than in other industries because of the hype. There are significant opportunities, and there will be winners. It's a once-in-a-generation event as it migrates from the illicit to the legal markets."