Marijuana exchange-traded funds (ETFs) provide investors with exposure to equities of companies that engage in the cultivation, distribution, and sale of marijuana and related products. Products of marijuana companies include dried flowers, oils, seeds, edibles, and more. Still prohibited as an illegal substance in many parts of the world, marijuana is gaining wider acceptance for both medicinal and recreational purposes. Support for continued legalization is growing, and cannabis is now a multi-billion-dollar industry. Marijuana ETFs are a straightforward way for investors to gain exposure to a diversified basket of marijuana equities and profit from this growing industry.

Key Takeaways

  • Marijuana ETFs significantly underperformed the broader U.S. equity market over the past year.
  • The ETFs with the best 1-year trailing total return are YOLO, CNBS, and THCX.
  • The top holdings of these ETFs are Village Farms International Inc., GrowGeneration Corp., and Village Farms International, respectively.
  • On November 3, 2020, voters in New Jersey, Arizona, and Montana approved ballot measures to legalize recreational marijuana, and Mississippi has voted to legalize medical marijuana use. South Dakota approved ballot measures to legalize both.

The marijuana ETF universe is comprised of 8 funds that trade in the U.S., excluding leveraged ETFs. Marijuana ETFs have dramatically underperformed the broader U.S. equity market. The benchmark ETFMG Alternative Harvest ETF (MJ), the largest ETF in the sector by assets under management, has provided a total return of -2.0% over the past 12 months compared with a total return of 19.4% for the Russell 1000 as of November 30, 2020. The best-performing marijuana ETF for Q1 2021, based on performance over the past year, is the AdvisorShares Pure Cannabis ETF (YOLO). We examine the top 3 best marijuana ETFs below. Aside from performance figures above, all numbers throughout are as of December 1, 2020.

ETFs with very low assets under management (AUM), less than $50 million, usually have lower liquidity than larger ETFs. This can result in higher trading costs which can negate some of your investment gains or increase your losses.

AdvisorShares Pure Cannabis ETF (YOLO)

  • Performance over 1-Year: 44.5%
  • Expense Ratio: 0.74%
  • Annual Dividend Yield: 4.24%
  • 3-Month Average Daily Volume: 144,834
  • Assets Under Management: $107.0 million
  • Inception Date: April 17, 2019
  • Issuer: AdvisorShares

YOLO seeks to provide long-term capital appreciation by investing in cannabis equity securities. It holds stocks of both domestic and foreign companies, but is primarily focused on those located in the U.S. and Canada. It also focuses on companies that specialize in offering consumer cannabis products. The ETF follows a blended strategy, investing in both value and growth stocks with various market capitalizations. The fund holds a relatively large share of cash as a percentage of total assets, at 22.8%. Aside from that cash component, the fund's top three equity holdings include Village Farms International Inc. (VFF:TSE), a company that operates agricultural greenhouse facilities and raises various produce; Innovative Industrial Properties Inc. (IIPR), a real estate investment trust (REIT) focused on industrial properties leased to tenants in the cannabis industry; and GrowGeneration Corp. (GRWG), an agricultural products distributor.

Amplify Seymour Cannabis ETF (CNBS)

  • Performance over 1-Year: 28.9%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 0.43%
  • 3-Month Average Daily Volume: 20,955
  • Assets Under Management: $11.9 million
  • Inception Date: July 23, 2019
  • Issuer: Amplify

CNBS seeks to provide investors with exposure to the global cannabis industry. At least 80% of its holdings are invested in companies that generate 50% or more of their revenue from the cannabis and hemp market. The ETF invests in a basket of equities across the market-cap spectrum, from micro-cap to large-cap stocks. Over half of its assets are part of either the cultivation & retail or pharmaceuticals/biotechnology segments of the marijuana industry. The fund invests in both growth and value stocks. Its top three holdings include GrowGeneration; Village Farms International; and Canopy Growth Corp. (WEED:TSE), a producer of medical cannabis.

Cannabis ETF (THCX)

  • Performance over 1-Year: 9.6%
  • Expense Ratio: 0.70%
  • Annual Dividend Yield: 6.35%
  • 3-Month Average Daily Volume: 68,460
  • Assets Under Management: $37.6 million
  • Inception Date: July 9, 2019
  • Issuer: Innovation Shares LLC

THCX aims to be offer pure-play exposure to the cannabis industry with a basket of roughly 29 stocks. The fund focuses primarily on Canada-listed companies, with roughly a quarter of holdings representing cannabis stocks in the U.S. market. The ETF follows a blended strategy, investing in both growth and value stocks. Its top holdings include Village Farms International; GrowGeneration; and Aphria Inc. (APHA:TSE), a producer of medical cannabis.