Investing In Marijuana As a Beginner

Now that marijuana is legal across much of the United States of America, so is investing in it. That provides a new type of business opportunity for anybody who is interested in owning and buying marijuana and getting rich in the process! In many ways, this might sound like living the dream, but the reality is a little more difficult. Marijuana stocks have only been around for the blink of an eye in the context of the stock market, so there isn't a long history of them to study before you get involved. Just because something's making money right now doesn't mean it will still be making money next month or even next week. That's true of anything in the stock market, but the performance of pot-related stocks is especially hard to predict. 

We understand that some of you won't want to get involved in investing in pot at all, and that's fine. We know that to many people, playing the stock market is the same as playing online slots. We can certainly see the similarities. You pay money for an intangible asset, you have no control over how that asset performs, and when everything settles, you'll have either won or lost money. That description could be applied either to the stock market or the 500 free spins casino at websites, and it would be accurate in both cases. You don't generally get to consult an advisor before you make spending decisions on online slots, though, whereas you do with investments - and that can make all the difference. 

We recommend and will always recommend that you consult with a qualified industry professional before you make any decisions about buying marijuana stocks or getting involved in the stock market in general. Only a professional is able to give you advice - all we can do is provide you with a little basic information. If basic information is all you're after, though, here are a few things you need to know. 

Marijuana Companies Come In Three Shapes

Thinking of “marijuana stocks” as being one entity is unhelpful and misleading. As has been noted by Nasdaq - who really ought to know a thing or two about the matter - there are three different types of marijuana companies you might wish to consider investing in. The first, and easiest to understand, are companies that grow marijuana. They'll own greenhouses, indoor growing facilities, or both. Their responsibility to themselves and their investors is to grow as much pot as possible as quickly as is safely possible, and then sell it on for a profit. The more they grow and the better connections they have, the more profit they'll make. 

Next up are biotech companies. Their focus of operations is purely medical as opposed to recreational. Biotech companies are more interested in the ingredients of cannabis than they are in cannabis itself, and will use those ingredients to make pot-related products to sell as medication. If you’ve ever bought CBD oil (which happens to be one of the most popular forms of marijuana stock), the product you acquired came from a biotech firm. 

The third arm of the cannabis investment market is made up of companies that provide ‘associated’ services. They include consultants, people who make lighting systems, people who make hydroponics, and distribution companies. Their connection to the marijuana industry might be tenuous, but their stock can still be listed as marijuana-related. 

For obvious reasons, it’s important to know what you’re investing in before you part with your money. Some people prefer the easy-to-understand nature of growing companies for this very reason, but that’s up to you. 

Directors And Employees Are Important

Anybody can open a company, and anyone - within reason - can float it on the stock market and sell shares in it. Just because something’s there doesn’t mean it ought to be invested in. Always look into the background of the people running a firm or offering a share before you buy into it. This information should be freely available online, and if it isn’t, steer clear. Because the market is so new, nobody working in it has a lifelong track record of making money from it. Look for people who’ve excelled in other roles - especially CEOs with a strong history of taking a company from start-up to major profits. Try to find out what their strategy is. Are they likely to buy other companies to expand rapidly? That’s potentially a fast way to profit, but also risky if they go too big too soon. Are they more likely to grow slowly and organically? That’s a lot safer, but it might be some time before they turn a profit. 

Know Who The Major Players Are

Even at this (relatively) early stage in the market’s development, there are a few companies that have managed to establish themselves firmly as market-leaders. If you like the sound of investing in growers, American company Constellation Brands and Canadian business OrganiGram Holdings have both performed well during the past twelve months. If you don’t mind which part of the industry you invest in so long as you’re involved, Innovative Industrial Properties and KushCo Holdings have both posted robust numbers in the past twelve months. That’s not to say you should invest in them specifically, but looking at their performance will give you a sense of what your other investments might look like twelve months from now, as well as when highs and lows appear in the market. 

The more information you can gather, the more confident you'll feel when investing your money. Even then, it isn't something you should do alone, so once again, we'll stress that you should contact an advisor before you spend a single dime! As exciting as the opportunity to invest in cannabis stocks is, the same pitfalls apply to it as they do to investing in any other form of stock. Nobody knows what's going to happen next, or what external force might impact the market. Every time you spend money, you take the chance that you'll lose it forever. When you make an investment, make peace with yourself that you might never see that money again, and if you do, it'll be a bonus. Making big gains in the market is what the investment game is all about - but if it were as easy to play it as some would have you believe, everybody would be a millionaire. Don't let us put you off, though - if you have the knowledge, the experience, the right advice, and enough capital, money is there to be made.