It seems like only yesterday that cannabis and marijuana were the drug of choice for rebels and anti-establishment hippies, and now they are storming the stock exchange. It might be surprising for anyone who dabbled in weed as a teenager, but today, cannabis ETFs and other types of investments are a popular option for investors.
While there’s a lot of hope that legal recreational marijuana might soon take off, for the moment, most investment opportunities are driven by medical marijuana. Only around 15 states have legalized recreational cannabis, although others have decriminalized it, but 36 states plus Washington, D.C., have all approved the use of medical cannabis.
What is medical cannabis?
The Cannabis Sativa plant, which is the source of both medical and recreational marijuana, produces over a dozen different compounds, each of which has different properties and effects. The most popular compounds for medical cannabis are cannabidiol (CBD), tetrahydrocannabinol (THC), and cannabinol (CBN).
THC is a more psychoactive compound, which produces the distinctive “high” of cannabis, while CBD and CBN both have more of a relaxing effect and are far less psychoactive. Most medical cannabis is based on CBD.
Medical cannabis is stepping up to the plate
There are a number of different conditions that can be eased by medical cannabis.
There are very few effective treatments for chronic pain, even though it’s one of the most common medical conditions. Strong pain relief options like opioids aren’t safe for long-term use because they so quickly become addictive, and the recent opioid crisis made a lot of people nervous about taking them at all.
But medical cannabis has been found to help ease chronic pain that can’t be relieved by traditional pain relief medications. Understandably enough, the lack of effective pain relief has driven a lot of interest in and take up of CBD by people with terminal cancer, arthritis, back pain, autoimmune diseases, and other conditions.
Mental health disorders
One of the leading reasons why people use medical cannabis is to treat mental health disorders. Once again, there are very few medications that work for depression and anxiety, especially when you’re talking about severe depressive disorders. CBD has also been found to be effective for PTSD.
Some therapies have been found to work, but they can take a long time and cost a lot of money, and it can be tough to find a therapist nearby who’s a good match. In contrast, you can buy low-dose CBD easily online, and get higher dosages from a dispensary.
Other medical conditions
Both adults and children with epilepsy and seizures use medical cannabis – mainly CBD – to keep their seizures under control.
Cancer sufferers use a combination of CBD and THC to help reduce the nausea, pain, and loss of appetite that are side effects of chemotherapy, and people with multiple sclerosis (MS) find that cannabis helps them feel better on a daily basis.
Finally, individuals with a neurodegenerative disease like Lou Gehrig’s Disease (ALS), Alzheimer’s, Parkinson’s, Huntington’s, and glaucoma use medical cannabis to bring relief from their symptoms.
COVID-19 gave medical cannabis a boost
As both a direct and indirect result of the pandemic, there are now more people in need of pain relief solutions. Some are suffering chronic pain from long covid, while others have cancer which could have been cured if it had been caught early enough, but the pressure of covid meant that it went undiagnosed until it was too late.
The pandemic also went a long way to lift the stigma of mental health disorders and drive demand for better treatment for depression and anxiety. Many people without prior mental health issues are feeling the strain of a year and a half of stress about infection rates, bereavements, and isolation. They’re more than happy to use an effective, legal treatment that helps them relax, even if they don’t technically have a diagnosis that requires it.
It helps that most states considered cannabis dispensaries to be essential businesses, so people were able to get medical cannabis even during lockdowns. Medical cannabis sales rose, and growers, retailers, and ancillary providers who sell things like gardening supplies for cannabis growers all benefited from the pandemic.
Medical cannabis is benefiting from legalization
Thanks to legalization, medical cannabis users feel confident that their CBD, THC, or CBN is safe, medically-assured, and uncontaminated. As more people use medical cannabis, it becomes more accepted as a regular treatment and a part of life, which in turn leads more people to use it who might not otherwise have considered it. Recreational cannabis, on the other hand, still has something of a stigma, even though that’s slowly fading.
The widespread acceptance and legalization of medical cannabis also means there’s a lot more investment going into R&D for new formulations and finetuning dosage and application methods, which in turn helps expand the market even more.
Medical cannabis is also very easy to access, either online or with a prescription through a cannabis dispensary, unlike recreational cannabis. It’s not just for smoking any more, either; you can buy medical cannabis in a whole range of forms, from candy-like gummies and CBD-infused luxury foods, to tinctures, oils, vaporizers, and concentrates.
A number of investors like the idea of being part of the legal drugs market, while others are simply interested in helping develop new and better treatments for a range of conditions. Startups are leading the way for medical cannabis, and a lot of new cannabis companies are turning to SPACs to go public, which are themselves another popular investment option.
With the rise in acceptance for medical cannabis and the changing legal environment, medical cannabis companies are worth a second look for investors looking for new possibilities.
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Investing involves risk. Principal loss is possible. As an ETF, the fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index.
A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in Psychedelics Healthcare and Medical Cannabis companies. Such companies may depend largely on the government regulation and their profitability can be significantly affected by restriction on government reimbursements for medical expenses, rising costs of products and services, pricing pressure, limited product lines, intellectual property rights, and long and costly government product approval processes. The investments rely on U.S. and Canadian regulation of psychedelic, healthcare and cannabis, and the fund could be adversely affected by changes in these regulations.
The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.
The Fund will not invest directly in or hold ownership in any companies that engage in cannabis- or psychedelics-related business unless permitted by national and local laws of the relevant jurisdiction, including U.S. federal and state laws. Accordingly, the Fund does not currently invest (directly or indirectly) in companies located in the United States if their cannabis- or psychedelics-related business activities are illegal under U.S. federal law, even if such activities are legal under state law.
PSY is new with a limited operating history.
The BITA Medical Psychedelics, Cannabis, and Ketamine Index is owned, calculated, administered and disseminated by BITA GmbH. It is not possible to invest directly in an index.
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