Here’s How to Invest in Weed Stocks
The cannabis industry is growing every day and there is no end to this growth in sight. As such, many people are wondering how to invest in weed stocks and profit off of this booming industry. If you’re not a stock market expert but are still interested in investing in weed stocks, we’ll take you through the basics to get started.
March 28, 2021
A brief introduction to stocks
Interested in investing in weed stocks but not really sure what that means? We’ll give you a quick overview. Go ahead and skip to the next section if you are already familiar.
Stocks are investments into companies that, ideally, return a profit for the investor and increase opportunities for companies to fund their growth, products, and initiatives. Stocks can be a win-win for investors and companies, as stockholders receive partial ownership of the company. This typically means investors may vote at meetings, but it does not give them much authority beyond that.
To put it simply, there are two main reasons investors own stock. One is to sell the stock for a profit when the price goes up, and the other is to receive dividends from the company’s revenue.
What you should know before investing in weed stocks
As exciting as the potential for growing wealth and investing in a company may be, it’s not a decision you should take lightly. Don’t just buy whatever weed stocks you come across in hopes that they will succeed. You must first carefully plan your course of action for the best results.
Recreational Cannabis or medical Cannabis?
It’s crucial to know which market you want to enter, as they are vastly different. On the recreational side, there is a growing number of states with legal adult-use cannabis. On the medical side, there are over 30 states with access to medical marijuana, which is significantly more than recreational states. Medical users must obtain a recommendation from a medical provider and carry a medical marijuana card for access.
What type of Cannabis stock?
There are three main types of marijuana stocks and it’s important that you fully understand them before choosing which type to invest in.
- Ancillary products and services providers:
These are companies that support marijuana growers through products and services. This can include lighting systems, packaging, hydroponic products, and many others.
- Cannabis growers and retailers:
These companies cultivate cannabis, harvest crops, and distribute products to the public.
- Cannabis biotechs:
These companies develop cannabinoid-based drugs.
Research the Cannabis company before making a move
Once you’ve decided the market you want to enter and the type of stock you want to invest in, it’s time to decide on a company.
If you don’t know how to narrow down what companies to consider, it may be worth pulling up a list of companies pre-analyzed by stock market experts or discussing the topic with an advisor.
Be sure to thoroughly research any company you are considering. Monitor their stocks for a while and read up before making a decision.
As a general rule, you should look at the company’s growth strategy and financials before making a decision. It’s also important to look into their management team.
Decide how much you are willing to invest in Marijuana Stocks
While stocks can be a wonderful way to increase wealth, they can also do the opposite. If you cannot afford to lose what you are investing, do not invest. Even if you do diligent research, stocks are sometimes hard to predict.
Never invest an amount that you cannot lose. That is an irresponsible way to approach stocks and will likely come back to cause problems. Sure, you may get lucky, but the opposite is also very possible.
Figure out an investment that won’t break the bank if you lose the money. On the other hand, be sure to invest enough that you will see a good return if the stock is successful. Find a good balance between risk and reward.
Risks involved with cannabis stocks
All stocks involve risks. Cannabis stocks involve even more. Fully understand these risks before making the plunge.
First of all, cannabis sales are still federally illegal, despite being legal on specific state levels. Ask any cannabis business owner and they will tell you that access to bank services can be extremely difficult because of this illegal status. This makes it super hard for businesses to get financial services they need to succeed.
Additionally, stock prices may be affected by changes in supply and demand. Given the cannabis industry is still relatively new, there are going to be lots of wrinkles to iron out over the years. Supply and demand imbalances are important risk factors to keep in mind.
Additionally, financial constraints for cannabis companies are super important to look at. Unfortunately, a lot of cannabis companies do not make it. Only invest in one you truly think will continue to grow.
Set a timeline for investing in Cannabis stocks
Investing in a stock is one thing. Knowing when to buy and sell is another. Establish rules beforehand so you know when you will sell, whether it’s when the stock surges in value or falls below the initial value.
How to buy your Cannabis stocks
You’ll need a broker to get started buying and selling stocks. There are several options for this, from brick and mortar brokers to onlines services. Decide what will work best for you and sign up from there.
According to stock experts at Bezinga, “There are generally 2 types of ‘buy’ orders: market order and a limit order. A market order will execute the purchase at the present market price, while a limit order will only execute if the price falls at or below the limit price. Although a limit price might give an investor a lower price of entry, there is no guarantee that the limit order will execute,”
Once you’ve purchased your weed stocks, you can monitor them and eventually sell when the time is right. Don’t just monitor your stocks, though. Keep an eye on the industry as a whole.
The bottom line about how to invest in Cannabis stocks
We hope anyone wondering how to invest in weed stocks has learned from this blog. While we just touched the surface, we hope that this will help to get you started on your financial journey in weed stocks!