The Horizons Medical Marijuana Life Sciences ETF began trading on the Toronto Stock Exchange on April 5, 2017. Before I go any further, please read the following disclosures to keep the lawyers happy:
First, twenty-six US states and the District of Columbia currently have legalized marijuana in some form. Three other US states will soon join them after recently passing measures permitting the use of medical marijuana.
Despite these state laws, however, marijuana is still illegal under federal law.
I’m not getting into a dopey debate as to whether this is good or bad; I’m just repeating the facts.
Second, this new ETF is traded on the Toronto Stock Exchange, which will present a huge barrier to most US investors. But, remember that the first modern ETF was also launched on the Toronto Stock Exchange in 1990 (called the Toronto 35 Index Participation Units), so it could be a matter of time until a similar product is offered in the US (but a lot of hurdles, like that pesky federal law that says marijuana is illegal, need to be smoked-out).
Finally, whenever someone asks me about an investment idea, my answer is always the same: I don’t know if it’s a good fit for you because I need to examine how it fits into your overall financial plan.
Now that the lawyers are stoked, let’s weed through some things to think about:
“Horizons Medical Marijuana Life Sciences ETF seeks to replicate, to the extent possible, the performance of the North American Medical Marijuana Index, net of expenses. The North American Medical Marijuana Index is designed to provide exposure to the performance of a basket of North American publicly listed life sciences companies with significant business activities in the marijuana industry.”
The North American Medical Marijuana Index
The index is baked in Canada, with a very strong Canadian tilt. In fact, 11 of the 16 companies are based there and 13 are licensed suppliers of medical marijuana in Canada. Three are American, though they don’t really deal with marijuana – Scotts Miracle-Gro? Is the grass greener with Miracle-Gro?
The management fee is listed as 0.75%, plus applicable sales taxes (and exit taxes) in Canada, which is high relative to most ETFs.
US Federal Law
Remembers, the federal government regulates drugs through the Controlled Substances Act (CSA) (21 U.S.C. § 811), which does not recognize the difference between medical and recreational use f marijuana. And the Trump administration has repeatedly said it expects greater enforcement of federal marijuana laws.
As a financial advisor, I have a rule that reads, in part, don’t do anything that can get you a visit from the Feds.
Let’s Be Blunt
I’m not advocating for or against this investment. If you really think it’s worth considering, be a good doobie and call me so we can hash it out.