Tag: investing

Is Cannabis a Sustainable Investment?

In January 2020 when cannabis was legalized in Illinois, and even before then when states were rolling out their legislation, people were looking for a way to capitalize on the cannabis industry. I remember jokes flying around the AAII office about if we would ever have a featured speaker or writer on cannabis investments (giving buy low, sell high a whole new meaning!).

To put it bluntly, the main reason I’m not personally investing in cannabis is because there are still people in prison for it. I don’t believe I should profit from cannabis investments while people are wasting away in prison cells for something that is now legal for recreational consumption in 19 states and the District of Columbia.

But I still want to investigate if cannabis fits into a sustainable investing framework. I previously used As You Sow to find funds that are actually sustainable, not just labeled as such. So, let’s take a look at cannabis exchange-traded funds (ETFs) and see how they grade based on As You Sow’s criteria.

This article by AAII finance writer Matt Bajkowski briefly discusses the budding cannabis industry. Only one of the cannabis ETFs mentioned is available for As You Sow’s grades: Global X Cannabis ETF (POTX). Global X Cannabis gets grades of A for fossil fuels, deforestation, civilian firearms, prison industrial complex, military weapons and tobacco.


These grades made sense to me since cannabis investments represent a narrow slice of the overall stock market. Although I couldn’t get data on any other cannabis mutual funds or ETFs through As You Sow, I figured most of the results would be similar.

Even though the Global X Cannabis ETF got a grade of A for prison industrial complex, this just means that the ETF doesn’t directly invest in prisons. A broader view of the cannabis industry and who it affects directly and indirectly is important here. Along with a history of racism and the problematic words used to describe cannabis, including “marijuana,” there are still disproportionately more Black and Latino individuals in prison because of it.

In discussing the disparity in arrest rates, an article reported on the American Civil Liberties Union’s (ACLU) research, saying that “Despite roughly equal usage rates, Black people were 3.73 times more likely than white people to be arrested for marijuana.” In Iowa, Minnesota, Illinois and Washington, D.C., this difference increases to between 7.5 and 8.5 times more likely.

On the environmental side of things, it appears on the surface that cannabis is a sustainable industry. But a quick search revealed that there are concerns about the use of energy and water to grow cannabis plants. An article from Bloomberg on the environmental impact of cannabis noted, “cannabis plants suck up around twice as much water as maize, soybeans, wheat and wine grapes, according to a 2021 study in the Journal of Cannabis Research.” This could be ironed out as the industry grows, and as more efficient energy is sourced.

Like with any industry, some aspects will be green and others will be brown—as Larry Swedroe said in our interview with him about environmental, social and governance (ESG) investing earlier this year. Cannabis benefits people suffering from anxiety, post-traumatic stress disorder (PTSD) and depression. Legalizing cannabis also boosted the economy, created jobs and decreased crime in areas where people began drinking less alcohol in favor of cannabis.

The decision to invest in cannabis is entirely up to you. It doesn’t fit into my personal investing strategy, but hopefully as states continue to legalize cannabis for medical and recreational use, those who are wrongfully imprisoned will be released, and the industry can become even more regulated to ensure that cannabis can be grown and maintained sustainably.

The World Isn’t Green and Brown

“Your green is somebody else’s brown.”
—Larry Swedroe

For the May 2022 issue of the AAII Journal, editor Charles Rotblut and I interviewed Larry Swedroe about his book with Samuel C. Adams, “Your Essential Guide to Sustainable Investing.” You can read the interview here!

As you’ve probably gleaned from my other blog posts about sustainable investing, investors are hitting many roadblocks on their way to finding companies and funds that are not only labeled as sustainable, but are truly acting on that label. With that in mind, I asked Larry whether having regulations set for environmental, social and governance (ESG) and sustainable investment labels would help.

Part of his answer made me hopeful for the future of sustainable investing: “There are a lot of people who say, ‘I really want to help the planet and I’m worried about climate change, so I’m going to screen out energy companies.’ To me, this would be a bad decision. We want to support companies that are creating technologies that improve the planet. The industry that’s working to create a greener planet (as it produces the most green patents) is the one that everyone vilifies: energy.

“If you screen energy companies out, you raise their cost of capital, making it more difficult for them to invest. A better strategy would be to use a best-in-class kind of rating system. This could lead you to consider investing in the energy companies that are making the most progress toward a greener planet.”

Just as the world isn’t black and white, with much room for gray and nonbinary thinking, the world isn’t divided into green (virtuous and sustainable) and brown (vice and sin) either—there’s a lot of muddiness in between.

Something that Larry stressed throughout our interview was that the individual investor is the one who must decide what their sustainable investing strategy looks like: “I don’t think there’s a right answer. There’s one right answer for each person, depending upon how deeply they feel about these issues and how deep into the weeds they want to get.”

One benefit of sustainable investing for me was that it really narrowed down my choices. There are thousands of things I could invest in, but once I made sure what I was putting my money into was sustainable, had low fees and was helping more than hurting the earth, I ended up with under 10 exchange-traded funds (ETFs) that fit those specific criteria at the time.

I’m still finalizing what my investing strategy will be, while also looking for future investments. Investing sustainably was my entry point, and I hope it helps you too!

Bonus: Part of our interview with Larry Swedroe is also available in video form! You can see what I look like inches away from a nervous breakdown, something I only share with my closest friends! Enjoy 😉

I read this so you don’t have to! The Behavioral Investor by Daniel Crosby

“The moral of the story: get a lobotomy and get rich.”
—Daniel Crosby

Since I now have money invested in the market, it’s time to face my humanity. Behavioral finance studies how psychology affects investors, and in “The Behavioral Investor” psychologist and asset manager Daniel Crosby investigates the ways in which our brains interfere with our investing success.

AAII Journal editor Charles Rotblut interviewed Crosby in 2019 and made me much more interested in how investors “ought to drive out emotion at every turn.” Crosby covers sociology, how investing affects the brain, physiology; ego, conservatism, attention, emotion and how investors can overcome all four; and how behavioral investing is rules-based. Each chapter ends with a “What’s the big idea?” section that summarizes main concepts.

Every time I go to check my Schwab account just to take a quick peek at my investments, I hear Vanguard founder John Bogle’s voice in my head: “When you get those regular retirement plan statements … don’t open them. Don’t peek. And when you do peek … be sure you have a cardiologist standing by. Because you will be so amazed at how much money you’ve accumulated over 20 or 30 or 40 or 50 years that you won’t believe it. You’ll probably faint, or something worse, and there will be a doctor there to revive you.”

I saw this sentiment echoed in “The Behavioral Investor,” as I suspected it would be: “Greg Davies shows that if you check your account daily, you’ll experience a loss just over 41% of the time. Pretty scary when we consider that human nature makes losses feel about twice as bad as gains feel good! Look once every five years and you would have only experienced a loss about 12% of the time and those peeking every 12 years would never have seen a loss. Twelve years may seem like a long time, but it’s worth remembering that the investment lifetime for most individuals is likely in the range of around 40 to 60 years.”

I used to think this was a more complicated idea, but it simply means that if you don’t look at your account constantly, you’re less likely to see your account in the red. I’ve read enough AAII articles—specifically on behavioral finance—to know that my emotions aren’t going to change the direction of the market, so why even get them involved? Don’t my emotions have enough work to do already? I’ll save it all up for 20, 30 or 40 years and then let it all out when I see how much money I’ve made!

Crosby also provides a helpful lesson on diversification: “Left to our own devices, we create portfolios in our own image. Americans buy American stocks. Steel workers are overweight manufacturing, while financiers double down on bank stocks. The timid fail to allocate to equities and the overconfident hold large positions in single stocks. Like an old married couple, our holdings start to look just like us, and there is great danger in that similarity.” He also encourages investors to avoid mutual fund manager Peter Lynch’s famous strategy of “buying what you know” in order to combat the tendency to make our portfolios “overweight [in] what we know.” Instead, he counsels us to “put in place a plan that diversifies across geographies and asset classes, both familiar and foreign.”

To really drive this strategy home, Crosby says, “By buying a diversified basket of index funds that covers a variety of asset classes, know nothing investors (who often know a great deal) are likely to beat more than 90% of active managers and have time to focus on pursuits more meaningful than compounding wealth.” I like those chances, especially as a “know nothing” beginning investor! (OK, maybe I know like three things now.)

Though Crosby doesn’t say specifically how often I should be checking my Schwab account, I’ll probably limit it to once a week as I start and then build up to once a month. I still want to know how my investments are doing, even if it’s just to say:

If you’re just getting started in investing, I wouldn’t recommend for this book to be number one on your reading list. I’m glad I worked up to it after reading more books on the basics, because if it was the first investing book I picked up I wouldn’t have been able to apply the lessons as well as I can now.

Stay tuned as I grow my investing library and read more books so that you don’t have to!

Read more book reviews next!

Broke Millennial by Erin Lowry
Financial Feminist by Tori Dunlap
Nice Girls Don’t Get Rich by Lois Frankel

Shop my investing library at Bookshop.org!

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