The cannabis industry is still young; however, experts predicted that this industry will be worth over $80 billion in the U.S. in just ten years. Legalization is spreading across North America and other parts of the globe at rapid speeds. The growth potential for the industry is staggering, particularly with U.S. federal legalization still on the horizon. Plus, there are a ton of cannabis companies hungry for investment.
All these factors combined make investing in a marijuana company seem like a no-brainer. Still, it can be difficult to know where to start. This article is ideal for beginners who are interested in investing in marijuana industry stocks but don’t know where to start.
What Are Stocks & How Do I Invest?
When most people talk about investing, what they’re referring to is the process of buying stock in a company. Owning stock is like owning a small piece of that company. When the company is doing well and making profit, the price of your stock goes up; if the company starts struggling, the price of your stock will drop. As long as the company you’re invested in keeps doing well, your stock will continue to grow. Eventually, you can sell your stock and hopefully make a profit.
Since most cannabis companies are relatively new, their overall value and stock prices tend to be low. This is good news for potential investors, who want to buy stocks at a low price. In the current market, cannabis companies make great investments, because the value of these companies is likely to increase dramatically over time.
So how do you pick which companies to invest in? Research! Research is the most important part of the investing process. It can be extremely difficult to judge which investments are worthwhile if you aren’t properly informed. Before making an investment, take the time to research a company’s values, current products, and future plans.
Many investors prefer exchange-traded funds (ETFs) to traditional stocks. ETFs are bundles of securities such as stocks, bonds, and commodities that generally track an index.
While ETFs are pretty common for other industries, there are limited options to choose from within the budding marijuana market. Below are two promising ETFs for people looking to invest their money in the cannabis industry.
ETFMG Alternative Harvest EFG (NYSEMKT: MJ)
This ETF tracks the Prime Alternative Harvest Index. This index is great for cannabis enthusiasts, as it contains an abundance of marijuana and hemp stocks. However, it also includes tobacco stocks, so keep that in mind in case that doesn’t align with your interests. You can invest in this ETF through the New York Stock Exchange (NYSE).
Horizons Marijuana Life Sciences Index ETF (TXS: HMMJ)
This ETF tracks the North American Marijuana Index. This index mainly contains marijuana and hemp stocks. This ETF is available through the Toronto Stock Exchange rather than the NYSE, but don’t worry –you’re still welcome to invest even if you’re from the United States, it just requires a little extra effort. To invest in this ETF from the U.S., you’ll have to find a dealer network willing to facilitate an over-the-counter exchange.
Companies To Check Out
Aurora (NYSE: ACB)
Aurora Cannabis is a company from Canada that produces and distributes a variety of marijuana products around the world. Their product line is quite varied, including marijuana flower, cannabis oil, CBD, hemp products, and marijuana accessories. Aurora Cannabis operates in 22 different countries and have the potential to expand even more.
Tilray (NASDAQ: TLRY)
Tilray is a cannabis company based in Seattle that exports its goods to Canada, Europe, Latin America, and Australia and New Zealand. They are a global pioneer in the production, research, cultivation, and distribution of medical marijuana. Tilray is the first medical cannabis production company to be certified by Good Manufacturing Practices (GMP).
Canopy Growth (NYSE: CGC)
Canopy Growth is one of the largest legal cannabis companies in the world. In 2018, Constellation Brands, best known for the beers Corona and Modelo, invested $4 billion into Canopy Growth. This marijuana company already had a strong presence in Canada, but now, with Constellation backing them, they’re one of the biggest names in the industry. Further adding to their notoriety, Canopy Growth also has a good amount of star power behind the brand, with Snoop Dogg and Martha Stewart partnering up with them.
KushCo (NASDAQOTH: KSHB)
KushCo is one of the leaders for the packaging segment of the marijuana industry in the United States. This company specializes in manufacturing a variety of products, such as vape cartridges, bottles, and tubes. They also own KushCo Energy which sells CBD products. KushCo is still expanding rapidly, which is promising to potential investors.
Are There Risks?
There are always risks involved when you invest in the stock market; however, investing money into the cannabis industry poses its own unique risks. Investing in the marijuana sector can be seen as a high-risk, high-reward investment. If you decide to play with the cannabis stock market, don’t invest anything you aren’t willing to lose. Since the legal marijuana industry is still in its infancy, there are no sure bets. Most cannabis companies have just started to go public, and many have yet to turn a profit, making them riskier investments.
The other issue with investing in cannabis stocks is the U.S. federal government. Even though marijuana is starting to become legal across the states, it’s still federally illegal. This means that the government could enforce federal marijuana laws at any time and in any way it chooses, creating even more uncertainty and instability in the market.
Bottom Line: Is Investing in Marijuana Worth It?
This isn’t a question that we can answer for you, but rather something that you have to decide for yourself. Use this guide as a starting point and do your own research into different cannabis brands and the marijuana industry. Cannabis has the potential to be a fantastic investment, as well as a disappointing one. If you’re the type that’s willing to gamble and watch how a new industry evolves, you might be graced with luck and find fortune. However, depending on who you invest in, you could also lose everything you put in. No matter what, make sure that you do your research so that you can invest your money with as much confidence as possible.