As the cannabis market keeps growing globally, there are many ways you can gain exposure to the industry. You can choose to invest in individual stocks or invest in a range of companies across the cannabis industry.
You should note that it’s still a bit risky to invest in cannabis due to legal uncertainties. However, with great risk comes great rewards. The legal cannabis industry has been termed the green rush due to the massive success it’s currently enjoying. Total US legal cannabis sales are expected to surpass $35 billion by 2025.
If you are interested in investing in cannabis, read on to find out how best you can go about it.
Types of Cannabis Investments
Depending on your goals and investment strategy, you can choose to take advantage of either short or long-term income opportunities. Currently, there are four primary classes of cannabis stocks linked to different areas of the cannabis industry:
- Growers These are businesses that run cannabis farms and actively participate in the cultivation of plants.
- Retailers Businesses that fall under this category include dispensaries in areas where individuals can buy cannabis-related products like oils and edibles.
- Manufacturers These are businesses that offer ancillary support to the industry. Most of the companies in this section are involved in the extraction of cannabis, product manufacturing, packaging, and labeling.
- Drugmakers are pharmaceutical companies that make use of biotechnology to make drugs with cannabis extracts.
Seven Key Steps to Cannabis Investment
- Research and gain an understanding of the different types and classes of cannabis products.
- Find out about the different kinds of marijuana stocks
- Understand the risks involved when dealing with marijuana stocks
- Learn how to assess a marijuana stock
- Study leading marijuana stocks and exchange-traded funds (ETFs)
- Invest carefully
- Closely monitor the changing industry dynamics
If you have chosen a company to invest in, start by researching the management team. You will also want to look at the business’s growth strategy, financials, and competitive position. Lastly, you must not overlook the number of convertible securities the company has sold. If it’s a large number, the stock might get diluted in the future resulting in a drop in the share prices.
Understanding the Risks Involved in Cannabis Investment
Every asset you will want to invest in carries some degree of risk, and cannabis is no exception. The main risks involved in the cannabis business are to do with legal and political issues. Because of this, it can be tricky for cannabis businesses to access critical financial services. The industry has also dealt with supply/demand imbalances and financial constraints. Therefore, you must study the current situation closely before you decide to invest your money. The industry is promising, but there are no guarantees.
This applies to all investments that you make. When starting, it’s always best to invest a small amount in a cannabis stock. As the industry grows and you start noticing improvements in the company’s revenue and earnings, you can then buy more shares. This will help you minimize losses, if any. It’s also essential to find tools that can help you to evaluate stocks properly before you invest.
Set a Timeline for Your Cannabis Stocks
Investing is one thing. Knowing when to purchase and sell is another. Before you invest in cannabis, set clear rules to know when you are going to sell. This can be when a stock’s value rises or falls below the original value. To analyze and evaluate your stocks effectively, you can use tools like the tradevue stock screener . Through tradervue, you can also review and learn your trading history.
A significant amount of growth should be in store for the cannabis industry, but it might not come as evenly as most investors want. If you follow some of the tips in this text, you can find ways to take advantage of this exciting and challenging opportunity that cannabis presents.