Why Psychedelic Stocks Are A Strong Hedge Against COVID-19 Risk

  • The COVID-19 pandemic is creating enormous economic uncertainty (and risk)
  • Investors always need to hedge against major risks
  • Psychedelic drug stocks are arguably the best hedge against COVID-related risks

What is the greatest generator today of economic and market uncertainty?

That’s a simple question to answer. The COVID-19 pandemic has totally disrupted the global economy. It has already resulted in one market panic – and unprecedented emergency financial measures to stem that panic.

As the spread of COVID-19 infections is rising once again in most of the Western world, this uncertainty can only increase.

Everyone hedges

A basic principle of investing is that it is essential to hedge against significant market and economic risks.

The most elementary example of “hedging” behavior is all around us: diversification.

Why don’t people put all of their investing capital into their favorite stock? Why not put all your eggs in one basket?

Risk.

There are few guarantees in life. Investing all your capital in one “can’t miss” stock – and then watching it crater on some unexpected event – can devastate one’s financial future.

Other types of hedging are also common.

Investors hedge against currency risks. They hedge against interest rate risks. They hedge against crop risks. And they generally hedge against economic risks.

The COVID-19 pandemic is a huge economic risk factor. Everyone can see that. But how do we effectively hedge against this risk?

How to hedge COVID-19 risk

One interesting option for investors to consider is psychedelic drug stocks.

That may seem to be a bizarre recommendation to those who are unfamiliar with the psychedelic drug sector, especially given that most of these drugs have been criminally prohibited for roughly 50 years.

In fact, it is this drug Prohibition that is part of the reason for the growing investor excitement surrounding the psychedelic drug space.

Medical research on the potential medicinal uses of this class of drugs ground to a halt for half a century. Now the doors to research are once again opening wide – and just in time.

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Disclosure:

The writer holds shares in MindMed Inc.

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