If someone told you that 2018 is on-track to becoming the biggest year ever for cannabis stocks, would you believe them? You should, because this is a fact.
Aside from Canada preparing to launch its legal recreational cannabis market on October 17, 2018, California’s cannabis market is booming. That’s without even mentioning the fact that the UK just legalized cannabis for medicinal use. There’s no question that the acceptance and demand around cannabis is growing rapidly nationally and internationally.
What’s more, numerous biotech companies are delving into the world of cannabinoid-based medicines and research. Recently, the FDA approved the first ever cannabis-derived drug for the treatment of epilepsy in July. It’s no question that the cannabis market is well and truly on fire.
But the green rush isn’t without its pitfalls and things to avoid as an investor. Here are a few things you should know know before diving headfirst into cannabis investment:
- In 2017, cannabis stocks increased growth by 90% on the North American Marijuana Index
A total of 39 leading cannabis stocks experienced gains of 90% last year. Progression with cannabis legalization at the state level is likely to further bolster the value of cannabis stocks. Thanks to improved federal approaches to banking, taxation and research issues, the Global Cannabis Stock Index soared 71% over a six-month period.
- Prominent cannabis company stocks can be purchased and sold on the public market
Take your time to research stocks on various exchanges such as the U.S. OTC market, the Nasdaq, the Toronto Stock Exchange (TSX/TSX-V) and the Canadian Stock Exchange (CSE). Look out for this symbol when seeking out over-the-counter cannabis stocks in particular: OTCMKTS.
- Diversifying your cannabis stocks portfolio is a safe way to invest
Just like with any other type of investment, portfolio diversification is key to mitigating risk and investing with confidence. Spend time monitoring the filings of whatever cannabis stock you intend on investing in by checking out their press release distribution system as consistently as possible. However, press releases aren’t always the most reliable source of information, so perform due diligence via their website, social media, and other investing community sources to most wisely invest in the stocks that you’re interested in.
- Cannabis stocks can be tracked on the Marijuana Index
Spend a few moments during your days browsing The Marijuana Index. This easy to use tool enables investors to see what’s happening with stocks listed both on the U.S. Marijuana Index and the Canadian Marijuana Index.
- Long-term cannabis investments will offer better returns
Are you serious about making money with cannabis stocks? If you answered “yes” to this question, you need to set your sights on the more well-established companies. Diversifying your portfolio with the newest players on the market can lead to big returns, but also means big risk. Established, steady growth, long-term companies are the most likely to provide stable returns for the average investor.
- Using limit orders could help you to profit from cannabis stock investing
If you are new to cannabis investing, limit orders may be the trick that you need. Unlike blue-chip stocks with low daily trading volumes and smaller market caps, cannabis stocks have a significantly higher spread. For this reason, you would benefit from using limit orders when investing and trading on the cannabis stock market.
- An ETF of combined cannabis stocks is a clever way to play the investing game
This is another good tip to ensure you stand a good chance at succeeding in the cannabis stock market investing game. Cannabis ETFs can be used to your advantage, since they can diversify and mitigate overall risk.
- Seek out stocks from cannabis companies trading outside of the U.S.
While you might feel comfortable sticking to cannabis stocks inside of the U.S., it is important to consider the changes that are currently happening in Canada. With cannabis legalization right around the corner, a lot of profitable cannabis stocks are trading north of the border right now. Many companies are fully operational in the states via different methods, but are listed publicly on some form of Canadian stock exchange. It’s worth checking out the up-and-coming cannabis markets in Europe and South America, too.
- Don’t ignore the potential of the ancillary cannabis stock market
Although the products with the highest margins in the cannabis industry tend to be cannabis oils and extracts, there are plenty of lucrative investment opportunities lurking in the ancillary cannabis business. These types of businesses may not come into contact with the plant, (such as packaging companies) but they play just as important of a role in regulating the growing market.
Not all cannabis stocks are guaranteed to deliver a good return on investment (ROI)
As with every other industry and investment market, keep in mind that not every stock is going to leave you with a pocket full of cash. Just as any other investment, finding the profitable cannabis stocks will take practice, thorough market research and in many cases, just a little bit of luck.