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Is Marijuana ETF a Buy After Hemp’s Legalization?

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December 2018 was a landmark year for hemp and hemp enthusiasts. This was the year that President Donald Trump signed the 2018 Farm Bill into law. The Farm Bill legalized hemp in all the 50 states, and apart from that, it now provides federal subsidiaries to US farmers. This came as good news to farmers and hemp enthusiasts, given that a lot of people had been forced to operate their hemp businesses under clouds of uncertainty for years.

Investing in Hemp

With hemp legalized, shrewd businessmen have already started asking questions whether this is the perfect time to invest in the cannabis industry. Recently, the ETFMG Alternative Harvest ETF, which is the only and the first pure ETF specifically aimed at the marijuana/cannabis industry was launched barely a year ago. What’s interesting about this ETF is that when it was launched, it gained a lot of attention, but the bubble that came with it popped. At the time of this writing, the fund has dipped to 22%.

What’s interesting about the fund is that all of the stocks held in the cannabis fund are held by Canadian companies. This makes a lot of sense because earlier in October, Canada legalized the use of recreational marijuana. The demand for recreational marijuana in Canada shot up to the point where there was a shortage of supply in the country.

At that time, the fund attained a historic high of $43.08. However, it hasn’t been a smooth sailing all through. Since then, several factors have conspired to bring down the value of the fund, including weak earnings by producers, and the stock market plummeting. As a result, the fund’s value tumbled, closing the year at $24.95 and shedding off almost 45%.

A New Lease of Life

When Canada legalized recreational marijuana, there was excitement in many sectors about the prospect that this had for the future. However, most of this was out of euphoria, and when the economic forces hit, they hit hard. According to Budding Equity president, Jason Wilson, a lot of people were excited about the prospect of a $7 billion market of 40 million people. However, this excitement made them lose sight of the bigger picture. People bought into the euphoria of the Canadian market, instead of the dynamics of the business.

Having signed the Farm Bill into law, President Trump legalized the cultivation and transfer of hemp between states for commercial use and any other use. Any of the previous restrictions that had been placed on the transportation, sale and possession of products that are derived from hemp were also removed. This, therefore, is a move that’s bound to spur activity in the market, and support the hemp industry. Economically, these are steps that can be factored in when it comes to decisions about investing in a marijuana ETF.

Pay attention to the fact that according to the Federal Government, marijuana is still illegal. Therefore, the SEC is not about to allow any mutual funds or ETFs to own companies that operate in the US.

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