Whether you are a seasoned investor with a rich and diverse portfolio or you’ve never purchased a share of stock in your lifetime, the opportunities in the cannabis industry can’t continue to go unnoticed for much longer. A business that was barely up and running a decade ago now boasts a multimillion dollar portfolio in 2016 alone.
Cannabis sales are projected to increase exponentially as more states legalize the purchase and consumption of weed. Experts predict that by 2020, the US cannabis industry as a whole could be valued near $20 billion, representing a compounded growth rate of 35% over the next five years.
Source: Zenpype.com
With such incredible amounts of success on the horizon, why wouldn’t anyone want to jump into cannabis investing with both feet? You just might, but keep in mind there are specific details in this industry that should be understood before making a stock purchase.
Laying The Groundwork
Although it’s a relatively budding industry for most, cannabis stocks aren’t necessarily much different from the options available in technology or even energy sectors. It pays to do some research and decide where you’d like to sink your money. Many find that purchasing shares of a farm or retailer is a better fit for them, while others opt for tech-based options like cannabis-specific point of sale systems.
There are far more subsets than an amateur investor might realize, and they are more lucrative than most would expect. As of November 2017, pharmaceutical and research firms in the cannabis arena had over $1.5 billion invested into various companies, with growers coming in second at $645 million. Don’t count out real estate either, because as dispensaries grow, so will this sector. Those investing in this area sunk over $200 million into the market in 2017.
Despite record growth, remember that cannabis is still a new industry, despite how many years people have been using it behind the scenes. The monetization of weed remains an unknown entity for many major financial players, leaving the market somewhat unstable. Although big profits can be made, it’s best to enter into these investments with realistic expectations.
The Players Who Rule The Game
The marijuana industry is becoming a bigger and bigger cash cow each day, yet that doesn’t mean that success is here to stay. Just like with any new concept or product, it takes time for it to become widely accepted by the public and integrated into the framework of the current business landscape. Although cannabis is steadily becoming more accepted by the public, they unfortunately aren’t the ones making big decisions.
Source: The Daily Economist
It remains to be seen how our current administration will impact the growth of cannabis investing, but between a more conservative set of legislators in place and the DEA continuing their quest to keep marijuana listed as a schedule 1 substance, the income potential within this sector could be limited.
How Can Cash Hurt?
You’d think that when it comes to investing, more cash would always be better. Unfortunately, that’s not the case with cannabis, as this cash-only industry has to overcome a fair share of hurdles to find an increase in growth.
Unless major legislation changes, anyone from the ground floor and up will continue to be forced to find their own capital outside of traditional bank loans. Every sector of the cannabis industry can be expensive, from growing equipment to retail space, technology breakthroughs and more, meaning that growth often comes more slowly. Keep in mind that as a slow moving industry, an investment in cannabis stocks should take on a long-term approach rather than making a quick buck.
Source: The Weed Blog
Try The Shallow End First
As with any major investment, it’s not always smartest to leap into the deep end and try to swim. If you are working with a sizeable budget, use a small portion of it to invest in cannabis stocks and set a timeline for yourself to see how your choice performs.
If you’re nervous about the ramifications of investing in such a new and somewhat prohibited industry, try exploring options that aren’t “true” cannabis stocks. Pharmaceuticals and biotech options are still raking in serious amounts of money without the direct stigma associated with other types of stocks.
Calculate Your Risks
The potential for success in the cannabis industry is just waiting to explode but may require patience from investors before things really take off. As with any monetary venture, the cannabis stock market should be approached with caution and after diligent and careful research. In the end, the future is incredibly bright in this industry and it just might make sense to get in now to see massive rewards within the next handful of years.