Things to Keep in Mind While Investing in Cannabis Stocks

With so many states legalizing either the medicinal or recreational use of cannabis, investors see this as an incredible opportunity to make some extra amount of profit. It is not only the legalization that has ramped up the cannabis investment sentiments but also the projected growth that the industry is going to see in the upcoming years. According to ArcView Market Research and its research partner BDS Analytics, the cannabis industry is expected to grow from $52 million in 2017 to an estimated $2.5 billion in 2027. It is also projected that more jobs will be created in legal marijuana sector than in the manufacturing sector by 2020.

While new opportunities are usually accompanied by new challenges, the cannabis sector is no different. Profit is the primary motive behind any investment. However, before doing so, it is utmost essential to select the best companies in the industry to make cannabis investment. The following points may be worth considering while investing in cannabis stocks:

  • Diversify your portfolio Before making any investment, one should choose from the full range of stocks available to redistribute their risks. This becomes exceptionally true for new stocks which are under widespread speculation.
  • Hire an expert financial adviser While investing in any risky asset, it is always advisable to take expert guidance as they are the right people to guide you through the best available stocks in the market for investment.
  • Identify the leaders It’s always smart to pick companies that are the market leaders in that industry. This is where the financial adviser comes into the picture. With his expertise and broader perspective of the market, you can choose the stock from the best ones available.
  • Core versus peripheral holdings With a diversified portfolio, weighing your holdings differently becomes easy. Large cannabis stocks can have a higher allocation while smaller and more speculative ones can have a smaller allocation.
  • Think long-term As Warren Buffet rightly said “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for ten minutes.” With the cannabis industry still in its nascent stages, the real opportunities of profit will only unfold over the long run.
  • Invest abroad Although cannabis is legalized in some states, it is still an illegal substance federally. Some of the best opportunities for cannabis investment can be found outside the US in abroad markets such as Canada, where cannabis is legalized for recreational use.
  • Proper market research Due to its speculative nature, some cannabis stocks may seem more lucrative than any other high-value stock. Doing an appropriate study of the market would only reveal the actual trends in the market which will eventually help in avoiding losses.

Although cannabis is still considered a schedule 1 drug by the US Federal Government, the future seems bright for the cannabis industry which has tremendous growth potential. The projected growth numbers may make the investors drool for some time, but the only way to make big time profits out of it is to remain vigilant while choosing the stocks and diversifying the portfolio proportionately.