On Sept. 16, the AdvisorShares Psychedelics ETF (NYSE Arca: PSIL) began trading. Its monumental because it is the first actively managed exchange-traded fund (ETF) in the U.S. to focus on psychedelics. The industry remains in its early growth stages and for long-term investors, it presents an exciting opportunity.
However, since there aren't many stocks that are in that sector right now, the fund isn't all that diverse – its top five holdings each make up more than 7% of the portfolio's weight. For large ETFs, its rare to see even one holding make up such a larger percentage, let alone five of them.
The top holding, at just over 10%, is Cybin (NYSE American: CYBN) , which offers psychedelic therapeutics. Other notable holdings include Field Trip Health (NASDAQ:FTRP), Mind Medicine (NASDAQ:MNMD), and Compass Pathways (NASDAQ:CMPS). The bulk of the companies are based in Canada (just under 60%) and due to the nature of the industry, more than 70% of are small caps.
A big advantage for investors who are bullish on the sector is that since this is an actively managed fund, they can rely on the fund's managers to select the best and brightest psychedelic companies to invest in, rather than trying to pick stocks on their own, which can be a risky prospect. And with a management fee of 0.60%, it's not a terribly high cost to pay for it, either.
Over the long haul, there are some potentially great returns for investors to earn from psychedelic stocks, but these types of investment are going to require lots of patience.
