There are some incredible opportunities available when investing in the marijuana industry. Here’s how to start making big bucks from pot stocks.
The global marijuana industry is seeing exponential growth. Governments in Europe and North America are legalizing a variety of cannabis products. Some experts predict the cannabis market will be worth over $60 billion in the next five years or so.
For many people, investing in the marijuana industry has never seemed like a smarter move.
Experts see the marijuana industry as one with potential for huge payoffs.
As with any industry, making good returns on cannabis investments means being a savvy investor. Our seven tips can help you make better choices and maximize your return.
1. Don’t Put All Your Eggs in One Basket
We’ll start with some tried-and-true investing advice. Diversifying your portfolio is the best way to protect it. This is as true when you’re investing in legal weed as when you’re investing in any other industry.
You might be convinced one stock is going to be a goldmine, but betting it all isn’t a smart move. Instead, spread your investments across several stocks. You should consider diversifying across different sectors of the cannabis industry.
Finally, you might want to spread your investments across several industries. Some financial advisors see the marijuana industry as a “bubble,” which means it could pop at any time.
2. Consider Opportunities in Different Sectors
The cannabis industry is not a monolith. There are many different players, all with different roles. The main ones that come to mind when considering investment opportunities are:
- Retailers and dispensaries
These companies represent the core of the marijuana industry’s activities. There are also other, supporting players, including:
- Technology companies
- Real estate
- Pharmaceutical companies
- Biotechnology companies
- Nutrition companies
As the industry continues to grow and diversify, there will be more opportunities. New financial products and new cannabis products will drive the market forward.
As you can see, you have many different options when it comes to ways to invest in the marijuana industry.
3. Investing in the Marijuana Industry Doesn’t Necessarily Mean Stocks
Take another look at the list above. You can see that buying stocks in a cannabis grower or a retailer is one way to invest in the cannabis industry. In fact, it’s not just about investing in the technology and internet of marijuana, but also how much of an interest is shared by others as well. For example, just look at the recent numbers behind how many people are interested in growing legal marijuana from home. This number just continues to rise as more legalization comes into place.
We also mentioned the need for real estate. Instead of buying stocks, you can invest by purchasing land or real estate. You’d then resell it or rent it to a company.
Another way to invest is providing upfront capital through a loan. Purchasing an exchange-traded fund is another way to invest.
4. Compare Different Stocks
For most people wondering how to invest in cannabis, stock options will make the most sense.
It’s easy to buy and sell stocks. More funds now include legal marijuana companies as part of their portfolio holdings.
You want to carefully check different stock options. Although the cannabis industry is projected to grow, not every stock will be a winner.
You should always do your homework. Check in on the management team. Research the company’s growth strategy and competitive position.
You should also take a look at the company’s financial position. If it’s not profitable yet, you might want to proceed with caution.
There are a few specifics to take into consideration when it comes to the marijuana industry. Keep an eye on the following factors.
- All-in costs of sales per gram for growers
- Warrants and convertible securities
- International distribution agreements
These are unique to the marijuana industry. Companies with international distribution agreements, for example, are more likely to succeed. This is especially true in the Canadian market, where a supply glut is likely looming.
5. Determine Your Risk Tolerance
If you’re wondering how to buy stock in marijuana, some more general investing advice might be in order. Experts are currently seeing the cannabis industry as a “bubble.” Right now, the market is growing and providing great returns.
This situation could turn in the near future. The bubble could pop, resulting in losses for many over-eager investors. You can compare similar bubbles, such as the tech bubble of the early 2000s.
Your job is to assess your own risk tolerance. If you can’t afford to lose much, then marijuana stock may not be the right option for you. If you can tolerate some risk, then you’ll want to invest in a few curated stocks.
Only those with high risk tolerance should pursue an aggressive investment strategy. For most others, it’s best to choose a few solid stocks and diversify your portfolio.
6. Find Reputable Sources of Information
If you’re wondering how to invest in marijuana industry stocks and actually make money, you’ll need to find good information. In this industry, this can be difficult.
Since most players in the industry are starting out, they may not yet be profitable or pay dividends. Nonetheless, they want to raise capital and attract investors. The company’s own reports may try to dress up information.
Finding reputable sources of information is a must. You can look at public financial reports and data for most companies. The folks at NICI recommend keeping an eye on the news as well.
7. Track the Industry
There are many risks when it comes to investing in the growing cannabis industry. One of the biggest risks is the fact the industry is still evolving. This rapid change means the stock market can be volatile.
You’ll want to watch the situation if you do choose to invest in cannabis. Even one regulatory change can have ripple effects on the entire industry.
The outlook for cannabis is currently good. Changing laws will play a role in the ultimate outcome.
Get Ready to Grow with Cannabis Stocks
Investing in the marijuana industry through stocks and companies can seem overwhelming at first. It doesn’t need to be difficult though. With our tips, you’ll be well on your way to picking some winning stocks.
If you’re looking for more financial tips, check out our blog. Managing your finances smartly will set you up for a better tomorrow.