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By Rebecca Lake. January 27, 2025 · This content may include information about products, features, and/or services that SoFi does not provide and is intended to be educational in nature. Cannabis ETFs are funds that concentrate their holdings in the cannabis or marijuana industry. Investing in a single weed ETF could allow you to gain exposure to dozens of cannabis-related companies, without having to buy individual stocks. As such, you might consider adding a cannabis ETF to your portfolio if you’re looking for diversification, as exchange-traded funds or ETFs may offer exposure to a collection of investments in a single basket. Investors should learn more about ETFs as investments, and the specifics of the marijuana industry, however, before investing. • Cannabis ETFs offer diversification and potential returns in a growing industry. • Higher volatility and legal, regulatory challenges in the cannabis sector can pose significant investment risks. • Cannabis ETF selection factors may include expense ratio, holdings, trading volume, liquidity, and regulatory compliance.

• A handful of issuing companies provide some of the more popular U.S. • Investors should also consider minimum investment, share price, and custodian availability. What Are Cannabis ETFs? Cannabis ETFs are exchange-traded funds that invest in companies that are connected to the cannabis industry. A marijuana ETF works the same way as any other type of ETF, in terms of how it’s traded, as they can be bought and sold on the stock market. As for how they work, ETFs pool money from multiple investors and trade on an exchange. All that sets a cannabis ETF apart from other ETFs is what it invests in — in this case, the cannabis industry. There are only a handful of cannabis ETFs that trade in the U.S. The world’s first marijuana ETF, Global X Marijuana Life Sciences Index (HMMJ) was launched in Canada in 2017. The first U.S.-focused cannabis ETF landed in 2020, with the introduction of AdvisorShares’ Pure US Cannabis ETF (MSOS).

Marijuana legalization efforts have spurred interest in cannabis investments. At the time of writing, 24 states and the District of Columbia have legalized marijuana for recreational use. Another 14 states have legalized cannabis for medical use. Under federal law, marijuana remains illegal. The cannabis industry is multilayered and diverse. Cannabis products are typically categorized according to their purpose and use. Medical marijuana is used to treat pain and symptoms of illness. It’s derived from the Cannabis sativa plant, which contains chemicals and active compounds. These chemicals, which include delta-9 tetrahydrocannabinol (THC) and cannabidiol (CBD), produce reactions in the brain and body that may help to ease pain or create psychoactive effects. It can also be used as a form of pain management for people suffering from other chronic or terminal conditions. Recreational or Balance Bloom Gummies official adult-use cannabis is cultivated for non-medical purposes.7 In terms of its composition, the underlying chemicals are the same but the strength of each one can vary. With recreational marijuana, there may be higher amounts of THC present.