(The following excerpt is from the Chapter 16 of the book, “Don’t Get Burned”)
The choice of investing in individual stocks or using managed portfolios and exchange traded funds (ETFs) is up to each investor, or investment team, or advisor. I am biased, but I believe in the use of ETFs as the most efficient trading vehicle. As a portfolio manager, I can do things at an institutional level that individual investors simply cannot, such as the lending of portfolio securities to create quarterly fund income payments or ETF basket trades to minimize capital gains taxes. If an investor does want to choose their own stocks, I would invite them to follow what I do as a cannabis fund portfolio manager. There is nothing to hide. An exchange-traded fund’s website lists complete portfolio holdings on a daily basis.
I am also biased toward investing in public, exchange-listed stocks – with the regulatory oversight and reporting that goes along with public stocks. It seems that almost everyone has heard about a friend of a relative, or neighbor, or co-worker who is involved in some type of cannabis opportunity. I would stay away from private deals and local investments. Like any entrepreneurial start-up business, most will not make it. Only a few will lead to great success stories. Many entrepreneurs are great idea people, but lousy businesspeople. Cannabis investing already has plenty of upside and plenty of risk. Stick to larger publicly traded stocks and ETFs.
For legal and compliance reasons, I am not going to describe individual cannabis related ETFs by name, but I will tell you what I like and do not like.
I believe in active portfolio management. A fund’s portfolio manager should use information available to make decisions on the stocks to own, which to avoid, and when to trade. On the other hand, cannabis-focused exchange-traded funds that are based on an index seem rather stupid to me. In a very rapidly changing and volatile area such as cannabis, I would never want to invest by blindly following …