The legalization of marijuana in some states has brought many news headlines; from the girl scout in San Francisco who had successful cookie sales in front of a pot dispensary, to marijuana tourism in Colorado. I think the impact the legalization of marijuana on investment options is an interesting and evolving topic. Let’s take a look…
Weed Mutual Fund or ETF?
There are many kinds of funds and investments to choose from. Many exchange traded funds ETFs are sector specific. For example, they might only invest in pharmaceutical companies and offer you hundreds of companies with in that sector. It’s not just investments in big (large-cap) companies, for example there are funds that invest in art. That might not feel like a stock market investment, but indeed it is. So, who is to say we wouldn’t see a fund dedicated to the marijuana industry. Perhaps it will be offered soon?
We might not have conceptualized this as a growth industry. However, even though there are many unknowns, money is flowing into this sector. According to this article in Bloomberg Businessweek, “ArcView projects the U.S. marijuana market that’s legal under state law will grow to $2.34 billion this year.” Some of the companies that make up this growing industry include, hydroponic companies, vaporizer producers and research houses for medicinal purposes. This MSN Money article gives more background on 14 such companies.
All investments have risk, and investing in this trend is no different. For instance, the hypothetical “Weed ETF” would be subject to legislative risk. For instance, the federal government could increase it’s restrictions in regards to state laws as marijuana is still illegal at the federal level. Also, it is unknown whether the trend will continue to grow from state to state. Will other’s follow Colorado’s lead?
I’m curious to see how legalization and investing in the marijuana industry will play out. Perhaps growth in this industry will become a mainstream part of the market and help us all SaveUp!
This post was written by SaveUp’s personal finance contributing writer, Catherine Hawley, CFP®.