Medical Marijuana Is Getting Its First ETF, and Investors Couldn’t Be Happier


Legal weed is a publicly traded business, and business is good

You probably know by now that marijuana will become legal in Canada next year and is already legal in parts of the U.S. This is great for consumers and all, but businesses are having a field day in the “green” space. An entire industry dedicated to the cultivation and proliferation of cannabis products appeared seemingly overnight, finding new ways to use the plant and create new sources of revenue.

A handful of these companies have since gone public on several stock exchanges. That means you can actually buy shares of million- or billion-dollar weed corporations. This will give you the chance to have your money make more money and save for retirement (or weed). Existing public companies like the Scotts Miracle-Gro Company ($SMG) are investing in companies that make supplies for growing operations and other weed-centric startups.

Starting tomorrow, you can buy more than a dozen pot stocks at one time by investing in a marijuana-focused ETF. This ETF is the first of its kind, and focuses mostly on companies trading on the Toronto Stock Exchange. If you ever wanted to invest in medical and recreational marijuana without going to your dispensary, this ETF might be the best place to start.

What’s an ETF?

An exchange-traded fund, or ETF, is like a basket of stocks that you buy into. The financial firm managing the ETF buys millions or billions of dollars worth of shares from select companies and creates a fund. You can then buy shares of that fund, giving you a small percent of the fund’s total holdings. This allows you to a little bit of each company held in the ETF.

Many ETFs follow stock indexes, like the S&P 500 or the Dow. These funds buy the companies listed on the index in an attempt to mimic the index’s movements. If an index goes up, the ETF will go up, and vice versa. (For more on ETFs, be sure to read our guide.)

How does this weed ETF work?

The Horizons Medical Marijuana ETF follows the Solactive North American Medical Marijuana Index. This index tracks the average performance of a select group of U.S. and Canadian-based companies that work in the medical marijuana sector. The ETF will start trading on April 5 as $HMMJ on the Toronto Stock Exchange, and will own shares of over a dozen companies, including Aurora Cannabis ($ACB), Scotts Miracle-Gro ($SMG), Canopy Growth ($CGC), and Insys Therapeutics ($INSY). If the weighted average of these stocks increases during a trading day, then the value of $HMMJ will increase, too. If you buy into $HMMJ, you will essentially own small percentages of every stock it holds.

Should you buy $HMMJ?

The medical cannabis space is booming in Canada, and most of the holdings in this ETF are in Canadian companies. If you think these stocks and the index will increase in value as weed becomes legal in Canada, you will want to do your research before investing in this ETF. If you don’t feel comfortable investing in the medical marijuana space because it’s so new, you could always invest in other index funds instead.


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