"I'm not making recommendations, but rather I launched the index to educate and inform investors about marijuana stocks because they are risky and speculative," said Fred Fuld who constructed the index and launched it on www.WallStreetNewsNetwork.com.
To be listed on the marijuana stock index, companies must have some sort of significant connection to marijuana and be in business for more than a year. The index excludes cannabis stocks that trade below a penny.
"Investors can use the index is to determine which stocks are suitable to invest in as well as to see how the industry is performing as a whole," said Fuld who is based in Concord, Calif.
For all intents and purposes, the marijuana stock index has outperformed the S&P 500. Since January 1, 2014 when marijuana was legalized in Colorado, the S&P 500 is up 0.4% compared to 10.6% for the marijuana index and as of January 1, 2013, the S&P 500 is up 20% while the marijuana index is up 385%.
"The marijuana stock index is a great way to keep track of this hot, emerging sector, which is outperforming the major indices right now," said Timothy Sykes, entrepreneur and penny stock expert in Miami. "But time will tell if these stocks can hold their gains because I am far from convinced that will happen."
Trading on the NASDAQ stock exchange, Psychemedics (PMD) is the only stock in the marijuana index that is paying a dividend yield at 4.0%.
"This company provides marijuana and drug testing services but it's uncertain how legalized marijuana will effect their business, because they provide services to law enforcement agencies that request testing," Fuld told MainStreet. "If marijuana is legal, that's one less drug people will need to be tested for."