If you're not sure what to invest in or just want to keep things simple, an exchange-traded fund (ETF) can be a valuable tool for your portfolio. By giving you a mix of different stocks, you get instant diversification or exposure to a certain theme (like "green investing"). There are plenty of ETFs to choose from and you can get pretty specific about your preferences.
Three emerging industries you should consider are cannabis, sports betting, and telehealth. They are all growing fast and the following ETFs can give you some valuable exposure to them: AdvisorShares Pure US Cannabis ETF (MSOS 1.23%), Roundhill Sports Betting & iGaming ETF (BETZ -0.29%), and Global X Telemedicine & Digital Health ETF (EDOC -0.84%). Although all three ETFs are down more than 29% in the past year and have underperformed the S&P 500 (it's up around 7%), over the long haul, investing in these funds can lock in significant gains.
The cannabis market is a promising but complicated and risky investment opportunity. Although marijuana is legal for use in dozens of states across the country, it remains illegal federally. Multi-state operators have footprints across the country with the caveat that their products can't cross state lines. The result is a complex situation where licensed producers have to be growing pot in every state they want to sell it in and are unable to benefit from traditional economies of scale.
It's a murky picture at best, and this is where an ETF can help. The AdvisorShares Pure US Cannabis ETF focuses on the American marijuana market and offers exposure to some of the top players, including Green Thumb Industries, Trulieve Cannabis, and Curaleaf Holdings. Its focus on the U.S. market is key, as that is going to be the largest pot market in the world once legalization eventually takes place.
Cannabis research company BDSA projects that in 2022, the legal U.S. pot market will be worth more than $28 billion -- that's roughly six times the size of Canada (where pot is legal federally), which will be at just $4.7 billion. And by 2026, the gap will be even larger, with the U.S. market worth $46 billion and Canada coming in at $6.3 billion.
There's plenty of growth to be had in this sector over the long term, but if you don't have the time or willingness to carefully watch it, you're better off investing in the AdvisorShares Pure US Cannabis ETF.
2. Sports betting
Sports betting, unlike cannabis, is federally legal and now it's up to individual states to decide if they want to permit it. Thirty states allow some type of sports betting (e.g., mobile, in-person) and more than 100 million Americans can participate.
Some states allow mobile betting while others don't. Like cannabis, this is a moving target for investors trying to keep track of different state regulations. An ETF like the Roundhill Sports Betting & iGaming ETF can come to the rescue. It contains the big sports betting names including Penn National Gaming, DraftKings, and Churchill Downs, among others (in total, there are 44 stocks in the fund.)
Analysts from Research and Markets estimate that in 2021, the U.S. sports betting market was worth $5.6 billion and it will grow to nearly triple that by 2025, when it will reach a value of more than $15.6 billion.
The telehealth industry has much less legal red tape since its operations are legal across the country. According to Grand View Research, the global telehealth market will be worth more than $787 billion by 2028, growing at a compound annual growth rate 36.5%. Improvements and advancements in digital infrastructure will help healthcare providers reach more people, resulting in more revenue growth for the platforms. Many of the key players cited in the report are included in the Global X Telemedicine & Digital Health ETF, including Teladoc Health, Cerner, and American Well.
Although many investors have been selling off telehealth stocks recently as COVID-19-related fears subside, this sector is more than a pandemic-fueled trend. Some virtual visits cost nearly half as much as in-person visits, according to a 2017 study by Health Affairs. Telehealth makes it easier to manage chronic conditions and helps people with limited mobility get healthcare access. While the pandemic shined a light on the sector, it's clear that telehealth is here to stay, and investors could make some impressive gains.