3 Things to Be Aware of With Marijuana Stocks

Less than 20 years ago, marijuana was illegal in all 50 states. Now, most have legislation that allows the use of cannabis. The industry is worth billions of dollars, and it’s expanding rapidly. However, it’s still riskier than most other investments. Here are some things you should be aware of with marijuana stocks.

Cannabis Is Still Illegal

Marijuana is classified as a Schedule 1 drug by the Federal government. The DEA chooses not to enforce this law in legal states, but their policy could become different in the future. Banks won’t grant loans to marijuana businesses because the policy could change. Also, many property owners won’t lease or rent to these companies. If drug policies change, their assets could be seized by the government for involvement in a crime.

In most states where weed is still illegal, you can invest in CBD products. They’re made from hemp, and they’re low in THC, the substance in marijuana that makes people feel intoxicated. Canada legalized recreational weed in 2018, so you can buy stocks in Canadian companies as well.

Do Thorough Research

Image via Flickr by van_mij

Before you invest in a marijuana stock, you should research the company, the laws in the state where it’s based, and the past behavior of the stock. Not all weed stocks are reliable investments, and every business needs a viable financial plan, competent employees, and a product that’s better than their competitors.

There are many types of marijuana companies out there, including retail sellers, pharmaceutical companies, growers, suppliers of gardening equipment, and more. The best marijuana stocks for you will depend on the amount of risk you’re comfortable with, the amount you want to invest, and how long you’re willing to wait for returns.

Watch Out for Over Inflation

Marijuana sales are growing exponentially, and analysts expect it to become more popular than alcohol. Unfortunately, many stocks decline after initial enthusiasm from investors. Some states are slow to start their legal and medical programs. This means lots of businesses lose revenue because they have to wait to begin sales.

If a stock has been consistently gaining value, don’t purchase it without plenty of information. Minimize your losses by selling immediately if the stock declines and investors lose interest. This industry is just getting started, so you should protect yourself by investing in more stable industries as well. That way, you won’t lose everything if your cannabis stocks start to decrease.

You can also reduce your risk by investing in an exchange-traded fund (ETF). It’s similar to a mutual fund, and it has stocks from several companies in the industry. Many startups are considered penny stocks because they can’t meet the financial requirements of the NYSE and NASDAQ yet. If you don’t want to risk a lot of money, these are good investments. However, these stocks are less likely to increase in value than many of the ones for established businesses.

Many marijuana stocks could become very successful. However, you should be prepared for a decline as well.


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