For seasoned investors, one thing worth exploring is the up-and-coming industries. There’s no doubt you’ve heard about marijuana stocks; the cannabis industry is a fast-growing one, as a matter of fact. In case you share the same interest we have in exploring the field some more, here is what you need you to know.
Types of Marijuana Stocks
Before you go around looking for cannabis companies, you need to know the types of companies are there; where you invest is a major determinant of how much profit you’ll make. First, there are the companies responsible for cannabis production, which haven’t been fully allowed into the U.S.’s biggest stock exchanges. Second, we have firms that contribute to the marijuana industry by funding medical marijuana production companies.; the investments there are a bit more secure. Third, companies only involved in making cannabis products strictly for medical use; these are most welcome in major U.S exchanges. In general, what you have to take into consideration is that investing in companies that can only be traded in through foreign exchanges, or via exchange-traded funds, can incur additional fees.
Market Growth Trends
As we’ve mentioned above, the type of marijuana company you invest in is quite a critical aspect. What you need to know about the marijuana market is that it is divided into two sectors; recreational marijuana and medical marijuana. While it can be difficult to determine the best marijuana stocks to buy; given the market fluctuations, it isn’t impossible. Because of the legalization movement that has been overtaking major countries, it is expected that companies involved in either or both sectors of the market are experiencing a “boom”. However, from the trends that we’re seeing right now, investing in medical marijuana is your safest bet; the product is more socially and legally acceptable, it has high growth expectations because of the medical research being put into development.
Investing in such a young industry must entail some risks, we all know that. The most major risk factor you need to watch out for is the instability. Marijuana stocks are more likely to struggle for a couple of years; until cannabis is fully legalized and the stigma dies, before reaching high prices. If you’re investing for your peace of mind, then wait a little bit before you go into the marijuana industry. The other risk factor is demand-supply forces. Now, there are not many suppliers which means that prices are controlled by the existing suppliers. As the industry grows, the competition between suppliers will cause previously exaggerated prices to decrease. This will definitely have an effect on the stocks.
Like we’ve said, the industry is young and volatile. While investing can benefit your portfolio greatly, it is not yet a smooth road with marijuana stocks. On the other hand, being a young industry means that, as an early investor, you’ll have a chance at owning a significant part of the company you’re investing in; which is a very valuable advantage. The main point is, investing in marijuana isn’t as stable as investing in tech stocks, but it has the potential to be highly rewarding.