Is YOLO ETF A Good Investment?

Lately there’s been quite a lot of interest in a fund called YOLO ETF. The official name is the Advisorshares Pure Cannabis ETF, but the nickname, (and the ticker name) just caught on.

What Is YOLO ETF?

Simply put, YOLO ETF is the first actively managed exchange traded fund or ETF with a dedication to cannabis and cannabis-related holdings.

To define the first part of this, an actively traded asset is one where a professional management team tries to actively track the holdings of the fund in order to optimize growth. In the case of YOLO, the strategy is long-term capital gains, and to that end, the managers will be looking for the best plays to include in the fund holdings over time.

So what is an ETF? An exchange traded fund is one that holds a basket of individual equities, in order to provide a kind of index that will change along with the weighting of its various holdings. These exchange traded funds were made to be bought and sold within a market day, so that small investors (or other interested parties) would have better opportunities to actively trade these collections of stocks without a lot of undue broker delays or stultifying rules.

And then there is the cannabis angle. YOLO represents a pioneering fund for getting invested in the burgeoning hemp and marijuana industries that are now emerging in today’s markets.

Is It Risky To Invest In Cannabis & Marijuana Stocks?

Cannabis investing is particularly risky given that regulations are rolled out state by state. Another significant risk is valuation. Given the exponential growth in market size that occurs when regulatory hurdles are overcome, prices of cannabis stocks can soar in short time periods ahead of valuations.

Pros of Investing in Marijuana

There are specific advantages to getting involved in marijuana and cannabis stocks and funds.

One of the overarching ones has to do with the dramatic types of legalization and decriminalization that are occurring in national markets.

It’s not every day that you get a brand-new market materializing on exchanges. That’s something that works in the marijuana investor’s favor – as countries make new relaxed rules, people get excited about being able to buy something that was always illegal before.

As a correlated point, you will see evidence of this in medical marijuana dispensaries springing up all over the country. These brick and mortar business locations are as new as the industry itself, and they will most certainly have specific stocks and funds backing them up as market representatives.

They also represent the will of physicians to prescribe marijuana for everything from glaucoma to anxiety. New science keeps showing new benefits of cannabis on the human body. That makes marijuana a unique “green health” product that other products can’t compete with.

Yet another plus for cannabis investing is that these companies sell actual products, and not intangibles that require a lot of research and development. Research and development startup firms can remain penny stocks for years, bringing negative EPS, only to disappear instead of growing.

Product stocks tend to have more defined parameters, and with cannabis and marijuana specifically, many investors value a particular equity by the volume being produced and distributed, which is typically a matter of public knowledge.

What Stocks Are In YOLO ETF?

YOLO ETF has a range of top cannabis and marijuana holdings, including Canopy Growth Corp. (CGC) which is a leader in the cannabis world and a household name in marijuana and cannabis stocks.

Then there are also companies like Charlotte’s Web (CWBHF) and CBDMD that are bringing to market all sorts of gummies, edibles, food and beverage products, tinctures, bath bombs and more. CBDMD also produces pet CBD products, which is another aspect of this new emerging market.

Then, too, YOLO has GW and Arena for pharmaceuticals, and equities like Greenlane (GNLN) as a vaping play. We assume that the addition of a BlackRock treasury component is basically a hedge for stabilization.

YOLO ETF Fees

In assessing YOLO fees, you have to look at comparative small cap blend equities and figure out where the fees are for YOLO relative to the general market.

What analysts have argued is that at 0.75% expense ratio, YOLO is on the high side. However, that’s not unheard of with actively managed funds, where there’s a little more work involved.

The tradeoff is that you tend to get more sets of eyes on the asset as the market changes. Instead of actively managing each ticker item themselves, fund buyers get a weighted blend that’s always diversified.

YOLO ETF Track Record

YOLO has a 52 week historic range of $10-$31, and currently rests around $21 per share. In looking at its size, we have shares outstanding of just over 16.7 million.

Subtract closely held shares, and you have the float. That means YOLO isn’t the biggest ETF around, but it’s a highly specialized one with unique appeal to fans of cannabis investing.

This fund is about two years old.

Is YOLO ETF A Good Investment?

Compare YOLO with popular exchange-traded funds like ARK Invest (ARKK) and you’ll probably lean towards the latter. While Cathie Wood’s ETF is aggressive by conventional standards in investing in new technologies that could change the world – any by inference be huge winners or huge losers, YOLO is highly specialized meaning potentially even more risky.

On the flipside that concentration in a single sector corresponds to possibly much greater upside. If you’re intent on adding cannabis/marijuana to your portfolio, this might be one to consider.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.