What to Know Before Investing in Cannabis Stock
With cannabis fully legal in ten states as well as the District of Columbia, and partially legal in over 30 states, many investors are putting their money into cannabis stock in hopes of making profits. Although it’s still an elusive market, many Americans and people across the world want to partake in this “green rush.” Medicinal and recreational marijuana is a fast-growing industry with more states and countries hopping on the legalization bandwagon.
However, there are a few things you need to know before investing in popular cannabis products. Consider these following tips and information before heading to your financial planner.
What are the basics of cannabis stock?
While you may know what cannabis is, you may not understand how the cannabis stock market actually works. Because weed is illegal federally, most American cannabis companies are unable to participate in the national stock market such as the NASDAQ and NYSE. What does this mean? This means that many cannabis companies are turning to the Toronto Stock Exchange in Canada, who just made recreational marijuana use legal in 2018. You can use foreign investment apps to begin your marijuana investing journey and become more knowledgeable on the cannabis industry.
Before dipping your toes into the pot industry, you also want to make sure the stocks you’re looking at have a tangible product. With cannabis stock soaring as more states and countries legalize it, many fraudulent businesses are creating “companies” to lure potential investors and take their money. Make sure you always take time to research potential companies you want to invest in, such as through the Better Business Bureau website or the SEC, to determine the legitimacy of the company.
Sectors of the marijuana industry
The cannabis industry has numerous sectors you should know about before investing. After the 2018 Farm Bill was passed, the growth, use, and sale of hemp was legalized in America— opening the doors for widespread manufacturing and use of CBD and other products. Here are the different sectors you should know about before diving into the cannabis stock market:
- Direct Contact Companies: These are the businesses that work directly with the plant. Whether it’s San Diego dispensaries in California or a biotechnology research lab in Colorado looking to create the next best medicinal drug, these sectors work with marijuana in the flesh. There are plenty of additional THC and CBD products that provide different benefits.
- Weed Supporters: Supporters of the cannabis industry include cannabis real estate businesses who provide land for marijuana cultivation, or agricultural technology (AgTech) companies who develop cutting edge devices to assist in the production and harvesting of weed. They also are the ones on the cutting edge of marijuana research.
- Ancillary Sectors: These sectors include technology and media companies who help marijuana businesses operate through software, point of sales services, and marketing. Additional sectors include consumption devices, such as cannabis inhalers, vapes, and pens.
The most important part of investing in cannabis stock is doing your research. Look into areas of high demand that have growth potential. As an oversaturated market, you want to dive into a sector that will turn your money into profits.
What about penny stocks?
Many inexperienced investors begin their investing portfolios with penny stocks because they have extremely cheap shares (as the name refers to). However, penny stocks, also called over-the-counter stocks, are an incredibly risky investment option. Companies that trade shares over-the-counter do not have to file audited financial reports and they sometimes inflate their claims to look more appealing to investors. When it comes to using a penny stock app to invest in the cannabis stock market, take caution. If you do your research thoroughly, you can end up making money in the long run. But, if you find yourself getting a hard deal, pull away before you lose all of your money.
If you want to expand your investment portfolio, it’s wiser to invest in a regulated exchange. First, it’s important to create a budget to set a standard for how much you’re willing to invest. Next, consult with your financial consultant to research the market and find a cannabis company to invest in. Finally, watch your money double! As the cannabis industry continues to grow, you’re sure to make profits in no time — if done correctly.
The Bottom Line
Investing in the cannabis industry is similar to investing in other industries as well. However, cannabis stock has a few nuances to be aware of, and as always, do your research. Watch your profits get higher when you invest in marijuana stock!