Best Psychedelic ETFs

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In recent years, psychedelics like psilocybin have been thrust into the spotlight due to their potential use as a treatment for various medical and mental health conditions, including post-traumatic stress disorder (PTSD). These substances have garnered the attention of lawmakers, military advocacy groups, pharmaceutical companies and investors.

Whether you are a savvy investor who wants to capitalize on the next big thing or a more casual trader who wants to diversify your portfolio, you may have considered investing in psychedelics companies. While this can lead to a big payoff, most of these organizations are in the start-up phase, meaning investing in them can be risky. Psychedelics ETFs

You can participate in this cultural shift while mitigating your risks by investing in psychedelics exchange-traded funds (ETFs), as opposed to individual stocks. With that in mind, let’s dive deep into what psychedelics ETFs are and identify the four best options for your portfolio. 

Quick Look at the Best Psychedelic ETFs:

4 Best Psychedelics ETFs

If you are looking for the best psychedelics ETFs and stocks for your portfolio, you may want to consider these four options.

1. AdvisorShares Psychedelics ETF (NYSEARCA: PSIL)

The AdvisorShares Psychedelics ETF is the only actively managed psychedelics ETF. This means that the organization has a team of researchers who perform analyses of trends and use this data to decide which companies to include in the ETF. Generally speaking, actively managed ETFs are more agile and responsive to market shifts than passively managed ones. 

The AdvisorShares Psychedelics ETF exclusively invests in psychedelic company stocks. While it could incorporate other assets in its portfolio, the company has chosen to go all-in in the psychedelics market. If this sector explodes as some experts predict, the value of this ETF could soar as well. 

2. Defiance Next Gen Altered Experience ETF (NYSEARCA: PSY)

Defiance Next Gen Altered Experience ETF is a passively managed ETF based on market cap. Unlike the previous ETF, this entity also allows cannabis companies to be included in its portfolio. 

Due to the track record of the cannabis industry, adding this to the portfolio can help further mitigate risks to investors and stabilize the value of the ETF. However, if you only want exposure to the psychedelics industry, this may not be the right ETF for your portfolio. 

This fund rebalances twice per year. Additionally, no company can exceed 7% of the index. While these factors may not directly impact your investments, they can have indirect implications on ETF value.

3. Horizons Psychedelic Stock Index ETF (OTCMKTS: HPSYF)

Horizons Psychedelic Stock Index ETF is passively managed, but it only includes psychedelics companies. The passive nature of this ETF means it may not be as agile as its actively managed counterpart. However, it effectively tracks the overall trajectory of the psychedelics market across North America. 

Horizon has implemented rules for maintaining portfolio balance. First, no company can make up more than 10% of the fund’s weighting. Also, companies that only invest a small amount of capital in psychedelics cannot compose more than 5% of the fund’s weight. 

4. The Elemental Advisors ETF (NYSEARCA: PSYK) 

The Elemental Advisors ETF is passively managed, but it differs from the other three ETFs in several key ways. First, it uses a natural language processing (NLP) algorithm to select which companies to add to the fund. Also, it uses the Enhanced Consciousness Index as its passive management framework. 

While the algorithm is designed to prioritize companies that focus on psychedelic treatments, it can also include neurology pharmaceutical organizations. 

What is a Psychedelics ETF?

An ETF functions much like a mutual fund. These pooled investment securities mitigate risks and can be structured in a variety of ways. ETFs allow you to invest in multiple psychedelics companies via a single purchase, as opposed to having to acquire separate stocks for each entity. 

Typically, psychedelics ETFs will only contain stocks for various psychedelics companies. However, they can also be structured to include bonds and commodities. Generally, the more diverse the ETF’s composition is, the better it will be for mitigating risk. 

Benefits of Investing in Psychedelics ETFs

Purchasing psychedelics ETFs gives you the opportunity to invest in companies exploring psilocybin therapy and other psychedelic-based treatments. By adding these types of ETFs to your portfolio, you can:

Mitigate Risk

If you invest in a single psychedelics company and that entity fails, you have lost your investment. However, let’s say you invest in psychedelics ETFs, and one of the companies in the pooled fund fails. In this scenario, the value of your shares will drop, but you will not lose your entire investment. 

If several of the other entities in the fund begin performing well, you may be able to recoup your losses in relatively short order. 

Participate in an Exciting New Market

Investing in an emerging market like the psychedelics space can be exhilarating, especially if you hit a home run. However, it can also be risky, which is why many investors lean toward ETFs as opposed to individual stocks. If you want to explore new investment options and potentially earn a strong return, psychedelic stocks or ETFs can be a great addition to your portfolio. 

Diversify Your Portfolio

Speaking of your portfolio, it is a good idea to invest in a diverse assortment of assets. If you have a relatively focused portfolio, purchasing psychedelic stocks or ETFs is an excellent strategy for making it more diverse and resilient to market changes. 

Potentially Earn a Strong ROI

Psychedelics ETFs are less risky than standalone stocks, but they also provide some excellent upside potential. As an early investor in the psychedelics sector, you have the potential to earn a strong return on your investments and generate a healthy profit. 

Where to Invest in Psychedelics ETFs

If you are interested in investing in psychedelics ETFs, explore this list of reputable brokers:

Choosing the Right Psychedelics ETF for Your Portfolio

The mental health sector, and specifically, the psychedelics industry, is growing at a rapid pace. Dozens of companies, including visionary start-ups and established pharmaceutical brands, are investing heavily in psychedelics as part of concerted efforts to discover new and more effective mental health treatment options. 

As a result of this newfound interest in this class of substances, psychedelics ETFs have evolved into an appealing and potentially lucrative investment opportunity. That said, it is critical that you choose the right ETFs based on the size and construction of your portfolio.

If you are interested in adding psychedelics ETFs to your portfolio, explore the various ETFs outlined above and find the one that best aligns with your investment goals. 

Frequently Asked Questions

Best Psychedelics ETFs Methodology

The psychedelics ETFs market is relatively new. Only a few dozen publicly traded psychedelics companies and even fewer ETFs exist. To date, only four psychedelics ETFs have been formed, all of which are included in the above list.