Cannabis has been used for many years. But investing in the Cannabis industry is still a controversial concern.
This certainly has become a point of debate.
And since the entire medical marijuana industry is booming, is it okay to invest in it but are there many other things that need to be figured out before that?
Here’s all you need to know about the medical marijuana industry and investments.
About Medical Cannabis Industry
The entire medical cannabis industry is pretty young. However, January 2014 is the beginning of the investable cannabis industry In IS as per the Co-founder and MD of Poseidon investment management.
Before January 2014, there were several medical markets in the US; however, those markets were not profit factors. Therefore, there was no equity and only a limited investment capital.
However, over the past seven years, 18 states in the US, along with the District of Columbia, have legalized cannabis for non-medical purposes. This permitted the industry to cultivate by bounds and leaps. As a result, and astonishingly, 2020 was a complete breakthrough during which the legal sales passed around $17.5 billion in the US alone. This number is almost 46% up from last year.
Medical cannabis enterprises are experiencing a prosperous growth period. For instance, My MMJ Doctor is a medical cannabis card service provider. The entity has seen tremendous expansion in the past two years and is continuing its growth spree. The network is spreading, and one can access their services in different states of the US.
Investing in cannabis stocks
Individuals can now invest in the cannabis industry by buying the company’s stocks within it. These companies are generally categorized into three.
- Cannabis retailers and growers
- Cannabis-focused biotech companies
- Ancillary service and product providers
The process of cannabis stock investment is similar to other industries. However, before investing in the cannabis industry, it is essential to do relevant research. You can do it by:
Checking out the company’s performance
- Compare it to the similar industry competitors
- Review the financial statements
Investing in Cannabis exchange-traded funds
Instead of investing in individual stocks only, one can add their investments into cannabis exchange-traded funds to their portfolio. It refers to a pooled investment, which uses money from several investors to purchase diversified stocks. And it is essential to be understood that whenever you invest in an exchange-traded fund, this indicates that you are investing in all the stocks within the ETF.
Since no investment is without risks, cannabis exchange-traded funds are not devoid of any risks. Companies in such an emerging industry may experience higher volatility and are likely to fail. This makes the investors think twice before investing.
Investors are also suggested to verify the fund’s expense ratio before investing. However, investors can limit the cost and associated risks by keeping the medical cannabis investment to a small percentage only out of the overall portfolio.
Risks involved in investing in Cannabis stocks
Before making investments in the cannabis industry, it is essential to consider all the associated risks and understand what you are investing in.
Many stocks may go through major drawdowns and upswing!
So the risk of such drawdown or upswing is always associated with the investment.
Therefore, an essential query arises here!
Should you invest in medical cannabis stocks?
Like any other industry, investors need to do thorough research and consider investing in the marijuana industry.
It is necessary to do due diligence and understand the associated risks of this marijuana industry.
If you are considering investing in marijuana industry stocks, ensure to have your financial ducks in a row!
Making investments in any of the industries brings associated risks.
And since the medical marijuana stock industry is newly introduced, analyzing associated risks and other metrics becomes essential. So, it is highly recommended to do your research entirely before planning to invest in the marijuana industry.
This will undoubtedly help you make a wise decision now!
Meet the author:
Silvia is a state-licensed medical cannabis physician dealing with medicinal marijuana. In addition, she is a well-established Geriatric oncologist and a passionate health writer. Her love for writing can be well-witnessed in her various informative articles. Her articles are well-applauded by readers and can be found in different magazines and journals. Besides her professional accolades, she is a doting mother of two kids and a supportive wife. She loves to cook and try new recipes, read books, go outdoors hiking, and play guitar in her spare time.