A New Psychedelic Stock ETF Just Launched: Here’s Why It Matters

Psychedelics stocks could be the next big thing. For investors who prefer to buy a basket of stocks, there is now a new exchange-traded fund that focuses largely on psychedelic stocks: the Defiance Next Gen Altered Experience ETF (NYSEMKT: PSY).In this Motley Fool Live video recorded on June 11, editor of health and cannabis agency Olivia Zitkus, and Motley Fool contributor Keith Speights discuss why the launch of this new ETF is important.

https://www.youtube.com/watch?v=MvJmH4fv0U4

Olivia Zitkus: On May 28, we launched the first US-listed psychedelic-focused stock. It’s called the Next Gen Altered Experienced ETF, trading under the New York Stock Exchange Arca with the ticker PSY, and it includes companies with a focus on psychedelics, cannabis and ketamine.

I’m not sure if you’ve heard of this before, but what do you think this means for cannabis and psychedelics in terms of their place in the investing mainstream? I mean the fact that this is all wrapped up in an ETF on the New York Stock Exchange.

Keith Speights: Yeah, I think it’s a positive sign that this industry, psychedelics in particular, is real. It’s still very, very early, Olivia. I mean, if you look at the companies in the space, most of them have early stage clinical candidates at best. Some are only in the preclinical stage. But look, I think there are real opportunities here.

There are some companies that have reported some very positive early results from psychedelic drugs and I think it’s a healthy sign that there’s an ETF now because that gives some legitimacy to this. This is very speculative, and so I think a lot of investors at this point definitely want to stay away from this space because you just don’t know what’s going to happen. But for really aggressive investors who are really willing to take a significant share of the risk, some of these psychedelic stocks could pay off immensely in the coming years.

I’m not sure about the ETF whether it’s a better way to go than buying some of the individual stocks or not. I haven’t looked at this ETF that much. In any case, when it comes to cannabis, I tend to shift towards finding the best individual stocks and buying a basket of stocks rather than buying an ETF, and I suspect that in this case would be the same if it is better to pick out some individual psychedelic focused stocks that are really strong and maybe invest in them. But again, I haven’t checked the ETF enough to know, so I’ll stop there.

seat cushion: [laughs] Everything good. Some research lines around cannabis and psychedelics and ketamine, we still have a long way to go. Recently, the DEA approved new growers for research; I think it was May 14 so researchers can study marijuana in particular, from more than one grower, which was a big deal. That was held up a long time, I think, under the Trump administration.

I think it was a farm at the University of Mississippi that the government approved in the 1960s and that was the only legal source of weed for federal research. When things like that start to fall apart, it gets interesting to see what happens.

Woodpeckers: What investors in the psychedelic space need to remember is that it is, in fact, biotech. It’s not like cannabis where you retail; psychedelics are becoming a biotech game and not nearly as comparable to cannabis. That’s one thing to keep in mind.