Investors looking to gain exposure to the cannabis industry can choose between individual cannabis stocks and cannabis-focused exchange-traded funds (ETFs). Each option offers distinct advantages and drawbacks.
Cannabis stocks allow investors to target specific companies they believe have strong growth potential. This approach can lead to higher returns but also involves greater risk, as individual companies are vulnerable to operational setbacks and market fluctuations.
Cannabis ETFs provide diversified exposure by holding a basket of cannabis-related companies. This diversification helps reduce company-specific risk and offers a more stable investment option, particularly for newcomers to the sector.
However, ETFs may include companies with varying levels of exposure to cannabis, potentially diluting returns. They also limit an investor’s ability to capitalize on standout performers.
Choosing between stocks and ETFs depends on risk tolerance, investment goals, and market knowledge. Many investors combine both strategies to balance risk and opportunity.