As we approach the end of Q1 2021, the horizon looks infinitely better for cannabis stocks than in previous years. Most of the signs coming out of Washington DC indicate that there might be a substantial changes to federal regulations governing recreational cannabis consumption and business. In addition, the national attitude towards marijuana has also changed since it was designated an essential industry during the 2020 Covid-19 pandemic.
As a result, there is plenty of speculation in and around cannabis stocks. In fact, many investors are clamouring to identify the best cannabis stocks. For new retail investors, investing in cannabis stocks might differ from the standard stocks you buy on Wall Street. The difference is in approach and the research you need to do before deciding which stock to invest in. But how do I invest in cannabis stocks?
We have compiled a list of three actions you should take when investing in cannabis to help you make the right decision for your investment interests.
1. Get to Know the Product
To successfully invest in cannabis, you need to know the product. Because Wall Street doesn’t directly invest in companies that handle cannabis directly, you also have to be comfortably aware of the different derivative products and industries that have emerged out of the cannabis industry. Products like oils, cosmetics, foods and others can all be made out of cannabis. You have to learn these derivative products, the industries they are in, how they perform to decide which one you want to get involved in, and therefore which companies you can pick from to invest in.
You also have to know that there are three main types of products that can be made from cannabis. These types are;
- Medical cannabis products: These are the products made for medical purposes and are prescribed by doctors. These products are legal in most states in the US.
- Recreational cannabis products: Recreational cannabis is consumed only legally in some states in the United States and is meant for adult use only.
- Manufactured cannabis products: These are products made for everyday routine consumption like cosmetics that have cannabis as one of the main ingredients in them.
2. Which Cannabis Stocks Should You Buy?
Like the different types of products listed above, there are different types of cannabis stocks to pick from if you decide to make a cannabis play in the stock markets. The various types of cannabis stocks available include;
- Cannabis growers and retailers: These companies deal with the actual planting and growing of cannabis. While most investors usually stay away from these because of regulatory issues, this is one of the sectors speculated to grow the fastest after the legalization of recreational cannabis.
- Cannabis pharmaceuticals: These are predominantly biotech companies that are developing drugs and therapies using cannabis
- Cannabis auxiliary and derivative sectors: These are companies in the support and derivative sectors. These include distributors of cannabis, manufacturers that use it in their process, among others.
3. Understand the Risk
There are many risks associated with investing in cannabis. For this reason, many investors avoided the industry, but the time to understand this risk is now if you want to get into the industry. Some of the different reasons for the risk include;
- Legal and political risk due to the uncertain regulatory climate
- Supply and demand risk as new businesses come on board, and the older ones adapt to survive.
- Liquidity risks since many cannabis businesses can’t access many structured debt products from financial institutions. Although, with the passage of the SAFE Act, this could all change.
These are the three main steps you should take to enter the cannabis industry as a first-time investor. We believe that if you do these well, you should have no problem finding the right stocks for you to invest in and profit from. Questions about investing in cannabis stocks? Schedule time with a Cannin Advisor now. Want to profit from investing in cannabis stocks? Get your free trial now.
How Do I Invest in Cannabis Stocks?
About Cannin: Your Cannabis Stocks Resource
Cannin is your #1 trusted resource for cannabis stocks. Our global team of experts evaluates all emerging cannabis stock investing opportunities. We aggregate hundreds of hours of financial research and provide tips on the best cannabis stocks for 2021.
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