May 15, 2020 (Baystreet.ca via COMTEX) -- In this article, I'm going to discuss why index ETFs are better options, generally speaking, than sector-specific ETFs like the Horizons Medical Marijuana Life Sciences ETF /zigman2/quotes/208856346/delayed CA:HMMJ -4.70% .
The HMMJ ETF is a good choice for investors looking to examine what I mean by concentration risk. Most cannabis-related stocks tend to move in the same direction at the same time, and the largest producers account for the lion's share of market capitalization in the sector.
There's a really high correlation coefficient in this ETF which increases the overall risk profile of this investment for investors seeking diversification.
This ETF provides global exposure, outside of Canada, for those not looking to get hemmed into a sector-specific risks present in domestic markets (which are heavily weighted to energy and financials, which have underperformed as of late).