Marijuana Investing: An Investment Blazing a Trail for Future Growth or One That Will Go Up In Smoke?

Until now, our answer has always been a firm “no.” But with so many of you and your clients asking about the possibility of “going green” with your investments, it’s time to take a closer look. Let’s explore the world of marijuana investing and find out whether it’s truly a smart move — or just a trending story.

There are several reasons we are seeing overall growth in the marijuana industry. For one, according to the National Conference of State Legislatures, the most recent tally shows that 24 states and the District of Columbia have legalized small amounts of marijuana for adult recreational use. In short, pot smoking does not have the same stigma it once had, and there are entire industries (both new and old) trying to take advantage of this trend.

While we acknowledge there are other direct, non-public ways to invest in the marijuana industry for the purpose of this piece, we focused on the review of public investments (mutual funds and ETFs specifically). 

Like any investment, understanding the economic rationale is critical before investing. Marijuana investing is expected to be a growth industry that has appeal. However, it is critical to look at the actual holdings of the available pooled-vehicle (i.e., ETF) investments. Similarly, as this is a niche investment, having appropriate risk and return expectations is important as well.

Currently, as of March 20th, 2025, there are seven marijuana-related ETFs available today in the United States. 

MSOS (AdvisorShares Pure US Cannabis ETF)

MSOS launched on 9/1/20 and has grown to become one of the largest cannabis ETFs, focusing exclusively on U.S.-based companies. Unlike other ETFs that may include international exposure, MSOS is a true play on the U.S. cannabis market. It primarily invests in multi-state operators (MSOs), which are companies directly involved in the production and sale of cannabis products. The fund is actively managed, allowing flexibility to adapt to regulatory changes and market dynamics.

CNBS (Amplify Seymour Cannabis ETF)

CNBS has been available since 7/23/19 and takes a unique, actively managed approach to cannabis investing. The fund seeks companies that derive at least 50% of their revenue from the cannabis and hemp industry, offering a more focused exposure. With an emphasis on growth and innovation, CNBS holds both U.S. and international cannabis-related stocks, including plant-touching companies, biotech firms, and ancillary businesses. Its portfolio manager, Tim Seymour, is a well-known cannabis industry expert, adding credibility and market insight.

YOLO (AdvisorShares Pure Cannabis ETF)

Debuting on 4/17/19, YOLO is one of the first actively managed cannabis ETFs, offering a more dynamic approach to investing in the sector. The fund focuses on companies generating at least 50% of their revenue from cannabis and hemp, ensuring more of a "pure-play" exposure. Notably, YOLO made history by becoming the first U.S.-listed cannabis ETF to hold U.S. multi-state operators (MSOs) indirectly through swaps, allowing it to tap into the booming domestic market despite federal restrictions.

TOKE (CAMBRIA CANNABIS ETF)

TOKE entered the market on 7/25/19, taking a global, actively managed approach to cannabis investing. Unlike some funds with rigid rules, TOKE seeks opportunities across the entire cannabis supply chain, including cultivation, pharmaceuticals, and ancillary businesses. While its strategy allows flexibility, TOKE has remained relatively under the radar compared to more well-known competitors. Its active management is designed to navigate the legal and regulatory complexities of the industry while capitalizing on growth trends.

MSOX (AdvisorShares MSOS 2x Daily ETF)

MSOX, launched on 8/23/22, is the leveraged version of MSOS. It aims to deliver twice the daily return of the U.S. cannabis sector, making it a high-risk, high-reward choice for traders looking to amplify their exposure to the volatile cannabis market. Like MSOS, it primarily focuses on U.S.-based multi-state operators, but its 2x leverage means it’s best suited for short-term traders rather than long-term investors. Given cannabis stocks’ inherent volatility, MSOX can experience significant swings in both directions.

WEED (Roundhill Cannabis ETF)

Introduced on 4/20/22, WEED takes a unique thematic approach to cannabis investing by targeting companies that are actively shaping the legal marijuana industry. It holds a mix of U.S. and international cannabis stocks, including cultivation, retail, and ancillary businesses. The ETF is passively managed, tracking the Roundhill Cannabis Index, and aims to provide diversified exposure to the growing legal cannabis market. Despite its fitting ticker symbol, WEED has faced competition from more established cannabis funds.

MJ (ETFMG Alternative Harvest ETF)

MJ is the oldest and most recognizable cannabis ETF, with an inception date of 12/3/15. Interestingly, it wasn’t always a cannabis fund — prior to December 2017, MJ was a Latin America real estate ETF. Its pivot to the cannabis industry gave it a first-mover advantage. While it primarily invests in cannabis and hemp companies, MJ also holds stakes in pharmaceutical and tobacco firms, providing a more diversified but indirect exposure to the sector. With a large asset base, MJ remains a staple choice for those seeking broad industry exposure.

In looking at the marijuana industry and its growth potential, there are several risks and other items to consider before investing, some of which we have already mentioned. One key point to remember is that marijuana is still an illegal and federally banned substance. Without the blessing of the federal government, there are still potential legal ramifications associated with marijuana-linked companies. Other considerations include the pace of growth in this industry as well as the fact that it’s a niche investment, something we don’t often promote.

What is our opinion on marijuana ETFs? We’ll be blunt. While this is clearly an interesting story and one that we will continue to monitor as it develops, we currently recommend sitting on the sidelines and waiting for some maturity from a regulatory, product, and industry standpoint. If you read this position statement and determine that an investment is still right for you or your clients, we would suggest keeping it a relatively small portion of any growth-oriented portfolio.

About the Authors

About the Mardio Nardone, CFA

Mario began his investment career in 1999 with Vanguard mutual funds in Valley Forge, PA, where he consulted institutions and financial advisors on investment policy, portfolio construction, and Exchange-Traded Funds (ETFs). He also held roles as a research analyst, a municipal bond fund specialist, among others during his tenure. In 2003 he earned the Chartered Financial Analyst designation, and he continues to mentor aspiring Charter candidates and young investment professionals.

Mario relocated to Charleston in 2010 to serve as Chief Investment Officer for a financial planning firm before establishing East Bay, the collaborative partner firm of (insert firm name), in 2014. As a Partner at East Bay, Mario serves a select group of Registered Investment Advisor firms as their outsourced Chief Investment Strategist.  Responsibilities of this role include continuous oversight of advisor clients’ investments, bespoke strategies for unique situations, client communications, and more.

Mario is Past President of CFA Society South Carolina and Former Chairman of the College of Charleston Finance Department Advisory Board. His approach to investments and the industry has been featured in Investment News, NAPFA Advisor Magazine, South Carolina Public Radio, and other publications and media outlets.

Mario enjoys early morning basketball games, the Charleston beaches and restaurant scene, and spending summers in coastal Maine. He is an avid world traveler and SCUBA diver, but also enjoys the simpler joys of life with his wife Piper, their daughter Pepper, and son Santino.

Learn more and connect with Mario on LinkedIn.

About Eric Stein, CFA

Eric Stein, CFA, joined East Bay Financial Services in 2018 and brings his passion for investing and client service with him. He enjoys sharing his knowledge and experiences with colleagues and clients.

Prior to joining East Bay, Eric has worked for a variety of firms both large and small. This includes 7+ years with Goldman Sachs Asset Management where he held roles in areas such as performance measurement, client service, risk analysis and portfolio construction. He also served as the Chief Investment Officer for RSM U.S. Wealth Management for 10+ years, providing strategic leadership and solutions for their national investment platform.

Eric is a proud graduate of Indiana University where he earned a B.S. in Finance. He also earned the Chartered Financial Analyst (CFA) designation in 2001 and continues to stay involved in the local society. 

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