The cannabis industry has become a hugely popular (but still elusive) market for investors in the last few years. Since cannabis is now recreationally legal in ten states, it has also become less “taboo” for the average investor to cash-in on. But before you start investing your cash in cannabis products, there are a few things you should know about investing in the cannabis industry. Let’s answer the most common questions about cannabis investment, and give you tips to help you make an investment that you and your wallet will be stoked about.
What facet should I invest in?
There are many different ways you can invest in the thriving cannabis industry. Whether you choose to invest directly in the best dispensary in San Diego, or put your cash toward the production side by investing in a high-quality cannabis testing lab, or fund a California marijuana farmer, there’s plenty of opportunity to make a profit. Not sure where to start? Ask yourself these questions before you make an investment:
- Is this product/business currently popular?
- Will this business model survive in the future of cannabis?
- Are there opportunities for growth?
- Is there a better product or service already out there?
Answering these questions will help you determine if the business model is doing well now, and if it has a promising future in the cannabis space.
The point is: gather as much information as you can to help you figure out if your cannabis investment will be a lucrative one. Additionally, you may want to consult your financial planner to assist you in your research and decision.
Mind the federal issue
Keep in mind that while cannabis is legal in certain states, it is still federally illegal. This means that most cannabis companies are not traded on the NASDAQ or NYSE, even if they provide medical marijuana. But that said, there are alternatives to consider if you’re set on investing in cannabis.
- Canadian Exchange: Many cannabis brands have turned to the Canadian stock exchange in order to publicly trade their company. You can use a foreign investment app such as Wealthsimple to start investing in brands on the Canadian market.
- Over-the-Counter: While cannabis isn’t considered “over-the-counter” as far as pharmacists are concerned, they can in fact, be traded using the over-the-counter (OTC) method. What is it? OTC trading basically means that the two parties trade directly, not as a part of the stock exchange. This solution can present some risks to the investor, such as a lack of transparency of company information and increased risk of fraud due to loose regulations and investor protection.
While this territory can be a little more risky for investors, there are definitely some serious benefits to be had if you make the right investment choice. These benefits include access to lesser-known companies and less regulations for the investor.
How much should I invest?
As a general rule, expert investors say you should never invest more than you can afford to lose. So before you do, make sure you do some budgeting work to help you determine how much money you’re comfortable investing.
Stay up-to-date with cannabis news
This tip is true for investments of all kinds. But since cannabis is an ever-evolving market, it’s especially important to stay informed about the latest in industry updates, stock values, and current trends. Subscribe to cannabis news organizations and make sure you’re the expert in all things cannabis before putting your money into a product, accessory, or grower you know nothing about!
Take a stoner poll
Looking for the best product to invest in? Go straight to the source—the stoner source, that is. If you’re a CBD connoisseur or even a seasoned cannapreneur yourself, check in with the budtenders at your local dispensary to see what brands people are liking, and which ones aren’t doing so hot. Or, you can use a site like Leafly to get reviews on the most popular edibles in Colorado, strongest vape pens in SoCal, or rarest strains. This will help you get a good idea of what products are going to survive the saturated market and which ones won’t.
Takeaways: treat it (kind of) like any other investment
While there are some nuances specific to investing in cannabis, the general investment rules still apply. Talk with your financial planner to help you research and make an investment you’re happy with.