How to Start Investing in Cannabis Stocks

Is green the new gold?

That’s the question that many investors are asking themselves as cannabis becomes legalized in a handful of states, opening the door of opportunity for many to get onboard. Investors, big corporations, and fund managers smell the financial opportunity that cannabis presents.

How can you get in the industry when it’s still in its infancy? You can jump in by investing in cannabis stocks. Even the Swedish government is jumping in with a purchase of stocks in Aurora Cannabis.

Cannabis stocks present a way for anyone to become an investor and jump on board the cannabis industry.

Read on to find out how you can invest in cannabis stocks and turn your green into a whole lot of gold.

Do Your Due Diligence

This is going to seem pretty boring at first, but you want to know as much as you can about the cannabis industry as possible.

You also want to study potential risks to cannabis stocks. For example, regulations, market forces like supply and demand all play a role in determining a stock’s value.

Your job as an investor is to become a student of the cannabis industry. You’ll start to learn which companies are profitable, which ones aren’t and which ones are struggling. You want to study long term trends, rather than the sharp peaks and valleys.

Cannabis stocks are still young, which means that the stocks will be volatile. By looking at the long-term trends of the best cannabis stocks, you’re able to figure out which stocks are good and which ones should be looked over.

If you want to invest in cannabis stocks, you have to remember one thing. It’s always changing. As the industry is evolving from a black market commodity to publicly traded stocks, there are bound to be hiccups and regulatory changes.

You need to stay on top of these changes because they will impact your investments.

A Brief Guide to Cannabis Stocks

Is it really possible to invest in cannabis stocks just like any other stock? Yes and no. There’s a lot of confusion around this issue because cannabis is still illegal in the United States, making it very difficult for companies to operate.

However, go across the border into Canada, and that maple leaf on the flag can appear to be a pot leaf since recreational marijuana use is legal there. That’s where many cannabis stocks are focused.

Very few cannabis stocks are traded on the New York Stock Exchange and NASDAQ. You can find a stock like Canopy Growth listed on the New York Stock Exchange.

That leaves you with a few primary ways to invest in cannabis companies. The first is through penny stocks. There are also mutual funds to invest in that offer cannabis stocks as part of the portfolio. There is also the potential to be an angel investor.

Penny Stocks

Since cannabis is still illegal in the US, it’s hard for many companies to be publicly traded. With penny stocks, companies aren’t required to follow the trading regulations put forth by the Securities and Exchange Commission, which regulates publicly traded companies.

Penny stocks are securities that are traded for about $5 a share or less. You can find these stocks on the OTC bulletin board.

Remember, penny stocks aren’t regulated, so that can increase your chance of investing in the wrong company. Without doing your research on companies and the industry as a whole, you could be throwing money out the window.

Mutual Funds

Mutual funds are professionally managed fund with a number of different types of stock holdings. Since they have a diversified portfolio of stock, they’re usually seen as a low-risk investment.

They’re also a more accessible form of investment. You’re essentially pooling your money together with many other investors to purchase stocks that you otherwise wouldn’t be able to afford on your own.

ETFs

ETFs are called index traded funds and are often confused with mutual funds. They bear some similarities, but there are two different financial instruments.

ETF tend to follow specific industries or indices, rather than a broad range of stocks. They’re also less expensive because they don’t have the operating expenses or commissions that mutual funds have.

Be an Angel Investor

If you want a high-risk investment that could pay off in a cannabis IPO, you can get in as an angel investor. You work with a startup and make a financial investment to help that company get off the ground.

There are so many cannabis companies starting up that there are plenty of opportunities to invest. Dispensaries, cannabis growers, CBD product producers can present viable investment opportunities for you.

There’s an App for That

Would You be surprised to learn that there’s an app to invest in cannabis stocks? There’s an app called Stash that can help you pick a few winners for cannabis stocks.

They’re regulated by the SEC, which means that the stocks and guidance that you get from the app comes under the fiduciary responsibility rule. They have to have your best interests in mind when making recommendations.

The good thing about this type of app is that investing in cannabis becomes accessible for everyone. It’s meant for individual investors who may be intimidated by other means of investment.  

Investing in Cannabis Stocks

Cannabis stocks are a bit like the Wild West. There’s a ton of money to be made, but there’s a ton of uncertainty if you don’t know where to look.

When you do your research and understand the different ways to invest in cannabis stocks, you’re giving yourself an opportunity to be a successful investor. That’s quite a feat in a market that has yet to fully mature.

Would you like more tips to invest your money wisely? Check out these investment opportunities.

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Author: James McQuiston

Ph.D. in Political Science, Kent State University. I have been the editor at NeuFutur / neufutur.com since I was 15. Looking for new staff members all the time; email me if you are interested. Thanks!

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