Alternative Harvest Etf: A Smart Investment Move?

The ETFMG Alternative Harvest ETF is an actively managed ETF that seeks long-term capital growth by investing in securities of companies in the US cannabis market. The ETF tracks the Prime Alternative Harvest Index, which measures the performance of companies within the global cannabis ecosystem. The fund's objective is to provide investment results that generally correlate with the total return performance of the index. It is important to note that the legality of cannabis varies across different countries and states, and prospective investors should be aware of the associated risks.

Understanding the ETFMG Alternative Harvest ETF

The ETFMG Alternative Harvest ETF (MJ) is an exchange-traded fund that offers investors exposure to the global cannabis industry. The fund tracks the Prime Alternative Harvest Index, which measures the performance of companies within the cannabis ecosystem that benefit from global medicinal and recreational cannabis legalization initiatives.

MJ was the first U.S. ETF to target the global cannabis industry, and it continues to be a leading option for investors seeking to capitalise on the growth of this market. The fund's objective is to seek investment results that generally correlate (before fees and expenses) to the total return performance of the Prime Alternative Harvest Index.

The fund's holdings include companies across the globe, including in the U.S., that are engaged exclusively in legal activities of cannabis for medical or non-medical purposes. It is important to note that the fund does not invest in any U.S. or foreign company whose business activities are illegal under any applicable federal or state law. As of January 23, 2024, the fund's assets under management (AUM) were $248.700 million.

The ETFMG Alternative Harvest ETF has a net expense ratio of 0.46% and has exhibited above-average trading volume. The fund's share price has fluctuated over time, with a 52-week range of $2.64 to $4.70 as of November 21, 2024.

It is important to consider the risks associated with investing in the ETFMG Alternative Harvest ETF. The possession and use of marijuana, even for medical purposes, remain illegal under U.S. federal law, which may negatively impact the value of the fund's investments. The fund's performance may also be influenced by various other factors, including consumer demand, regulatory measures, and competition within the cannabis industry.

Investing in the global cannabis industry

The ETFMG Alternative Harvest ETF (MJ) is the first US ETF to target the global cannabis industry. The fund tracks the Prime Alternative Harvest Index, which measures the performance of companies within the global cannabis ecosystem that benefit from medicinal and recreational cannabis legalization initiatives.

Benefits of Cannabis and THC-Based Medicines

There are many significant applications for cannabis and THC-based medicines and treatments, ranging from epilepsy to cancer treatment and non-opioid pain management.

Global Cannabis Market Growth

The global cannabis market is expected to experience substantial growth in the coming years. According to projections, the market will reach a volume of USD $102.9 billion by 2028, with an annual growth rate (CAGR 2024-2028) of 14.06%. Another source estimates an even higher CAGR of around 26.7%, resulting in a market size of $70.6 billion by 2028.

Legality of Cannabis

It is important to note that prospective investors should be aware of the legal status of cannabis. While some countries have passed legislation to legalize the use of recreational or medicinal marijuana, the possession and use of marijuana, even for medical purposes, is still illegal under US federal law.

Investment Strategy

The ETF seeks investment results that generally correlate with the total return performance of the Prime Alternative Harvest Index. The fund's holdings include companies within the cannabis ecosystem, such as Canopy Growth Corporation, Tilray Brands (TLRY), and Aurora Cannabis Inc.

Risks and Considerations

Investing in the ETFMG Alternative Harvest ETF comes with certain risks. The fund's investments are concentrated in the cannabis industry, which is heavily influenced by changing laws and regulations. The use and possession of marijuana remain a violation of federal law in the US, even in states where it has been legalized. This legal discrepancy may negatively impact the value of the fund's investments. Additionally, cannabis companies may never gain full legal status to produce and sell their products in the US or other jurisdictions.

Distribution History

The fund has a distribution history available on its website, detailing dividend payments and other relevant financial information.

Where to Buy

To purchase shares of this ETF, interested investors can contact their financial advisor directly or log in to their preferred online trading platform.

Cannabis-based medicines and treatments

Cannabis-based medicines have been found to be effective in managing conditions such as epilepsy, chronic pain, multiple sclerosis, severe nausea, vomiting caused by cancer treatment, and irritable bowel syndrome. The active chemicals in medical marijuana, known as cannabinoids, interact with the body's endocannabinoid system, which is involved in regulating functions like appetite, memory, movement, and pain.

In the United States, the ETFMG Alternative Harvest ETF (now known as Amplify Alternative Harvest ETF) is the first ETF to target the global cannabis industry. This ETF provides investors with access to companies within the cannabis ecosystem that benefit from the growing trend of global medicinal and recreational cannabis legalization initiatives.

The global cannabis market is expected to exhibit strong growth in the coming years. According to ETFMG, the market is projected to reach $70.6 billion by 2028, representing a compound annual growth rate (CAGR) of around 26.7%. Amplify ETFs, on the other hand, estimates a slightly lower CAGR of 14.06%, resulting in a market volume of USD $102.9 billion by 2028.

It is important to note that the legality of cannabis varies across different countries and states. While many regions have recognised the medicinal benefits of cannabis, it remains illegal under federal law in some places, including the United States. Therefore, investors should carefully consider the legal landscape and risks associated with investing in the cannabis industry.

Risks and illegality of cannabis investments

Investing in the ETFMG Alternative Harvest ETF, which tracks the Prime Alternative Harvest Index, means investing in companies that are part of the global medicinal and recreational cannabis legalization initiatives. However, investing in the cannabis industry, especially in the United States, comes with a unique set of risks and legal uncertainties.

Legality of Cannabis in the United States

While the use and possession of cannabis are illegal under federal law, medicinal and recreational cannabis use has become increasingly widespread. Thirty-eight states and Washington, D.C., have legalized medical cannabis, and 23 states and D.C. have legalized recreational use. This has created a complex legal landscape where state and federal laws regarding cannabis often conflict. Even in states that have legalized cannabis, its possession and use remain a violation of federal law.

Risks of Cannabis Investments

Enforcement Threats

The main product of the cannabis industry is still a Schedule 1 drug at the federal level in the United States. This creates legal uncertainty for investors, as there is a possibility of future enforcement threats and changes in legislation.

Speculative and Volatile Investments

The cannabis industry is relatively new, with legalization for purposes beyond medicine beginning only in 2012. As a result, many cannabis stocks are small and fall into the category of penny stocks, which are riskier and more volatile. These stocks may experience wide price swings and trade less frequently, making it harder for investors to sell when needed.

Scams and Fraud

The popularity and speculative nature of cannabis stocks have also attracted scam artists and fraudsters. The Securities and Exchange Commission has issued alerts warning investors of potential investment fraud and market manipulation.

Limited Access to Financial Information

Many cannabis stocks trading in the U.S. are Canadian, and there may be more limited access to financial data and company reports compared to what is required and available in the U.S. This lack of transparency can make it challenging for investors to make informed decisions.

Limited Support from Financial Institutions

Due to the federal illegality of cannabis, many banks and financial institutions are reluctant to engage with cannabis businesses. This can create challenges for investors in terms of accessing investment opportunities, managing finances, and seeking professional advice from advisors or portfolio managers.

Final Thoughts

While the cannabis industry offers promising growth potential, it is essential for investors to carefully consider the risks and legal complexities associated with this sector. Thorough research, diversification, and a long-term investment horizon are crucial when considering investing in cannabis-related companies or ETFs.

ETFMG Alternative Harvest ETF performance

The ETFMG Alternative Harvest ETF tracks the Prime Alternative Harvest Index, which is designed to measure the performance of companies within the global cannabis ecosystem that benefit from medicinal and recreational cannabis legalization initiatives. It was the first US ETF to target the global cannabis industry.

The ETF's performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment in the fund will fluctuate, and an investor's shares, when redeemed, may be worth more or less than their original cost. The fund's current performance may be lower or higher than the performance quoted.

As of December 31, 2023, the ETF's performance since inception on an annualized basis is as follows:

• Since Inception Cumulative: 24.06%
• Since Inception Annualized: 5.11%

As of January 23, 2024, the 30-Day SEC Yield was 3.03%.

The ETFMG Alternative Harvest ETF has shown positive returns since its inception, but it is important to note that past performance does not guarantee future results, and the value of investments can go down as well as up.

Frequently asked questions