A PotNetwork Special Report
The marijuana stock market is an investor’s paradise at this moment in time. In fact, in a few years, the global marijuana stock market expects to be in the triple-digit billions of dollars. American investments in cannabis already exceed $3 billion in 2018, with half of the year still left to push pot stock investment even further.
The marijuana industry is going mainstream, and so is the marijuana stock market. If you’re ready to jump into the market, here is some information to help you put together an excellent marijuana stock investment strategy.
A Note on Exchange-Traded Funds (ETFs)
If the idea of reading corporate documents and SEC filings sounds too time-consuming and is not exactly your cup of tea, consider putting your pot stock investment into an exchange-traded fund (ETF).
There are a few exchange-traded funds to consider in the marijuana stock market: the ETFMG Alternative Harvest ETF (NYSE:MJ), the Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) (TSE:HMMJ), and the Evolve Marijuana ETF (SEED.TO) to name a few. In an ETF, analysts have pre-selected stocks and included companies based on the due diligence they’ve already done, so these are an easy way to invest in marijuana stocks.
And One on Over-The-Counter Marijuana Stocks
Many cannabis businesses trade on the over-the-counter (OTC) exchanges. Why? Because marijuana is still illegal on the federal level and remains classified as a DEA Schedule, I drug. Because of its federal status, many companies have great difficulty being listed on the major U.S. exchanges. They’ve turned to OTC because cannabis companies are not held to the same level of scrutiny that the SEC imposes on the major exchanges. It’s been a great way for these companies to still go public.
OTC stocks do have some issues. There is a greater variety of the quality of companies listed on this exchange. For many entrepreneurs, it was their only way to raise capital. But don’t shy away from all OTC stocks. Just because they are a lower-priced stock doesn’t mean there are not some good deals out there.
But now, here’s how to put together a solid marijuana stock investment strategy:
First, Find The Right Marijuana Stock Investment
How do you find the best marijuana stock in which to invest? It takes a little bit of research into the market to answer this question. Larger, more established cannabis companies have steadily performing stocks. Some of the smaller cannabis companies may have skyrocketing returns, but some have also had the same-sized losses.
To gauge overall industry performance, take a look at the North American Marijuana Index. It tracks the largest marijuana stocks in the industry right now, with adjustments every so often to add new players. In the last three years, this marijuana stock index has posted gains of 27 percent. By comparison, the S&P 500 performed at 28 percent for the same period, so that is really saying something about the cannabis industry.
Cannabis stocks involve much more than just growers. The industry is filled with many service companies that provide lighting, soil, vertical farming and more. There are biotech firms and pharma companies making medical cannabis drugs, too.
Still, it can be somewhat difficult to find the right company —a dream and not a dud. Before you invest your money in a marijuana stock, always research the company by reading articles and looking at SEC filings and other documents. The latest online news can give you a good feel for the market and how the company is performing.
Don’t rely just on company press releases. After all, they are written by the company, so naturally, they have a very positive tale to tell. It does take some effort to read articles and SEC filings, but in the long run, it is worth the effort to grasp a comprehensive picture of what is really going on. If the company doesn’t have an SEC filing, that is a red flag not to invest.
Second, Choose A Smart Investment Advisor
What do investment advisors say? Find a marijuana stock picker and read what they have to say. Green Chip Stocks, Jeff Siegel, and The Cannalysts are all great choices. For example, in a recent article, Siegel stated that many Canadian cannabis stocks are currently overvalued; instead, he told readers to turn their attention to U.S. cannabis stocks. It’s the next big market.
Siegel recommended picks like MariMed (OTC:MRMD) and Innovative Industrial Properties (NYSE:IIPR) that he says are performing quite well right now. Certainly, research stocks that are trading on major stock exchanges like NYSE and NASDAQ--companies like Canopy Growth Corp. (NYSE:CGC), Cronos Group (NASDAQ:CRON) and GW Pharmaceuticals (NASDAQ:GWPH).
Third, Invest What You Can Afford
Once you’ve found the marijuana stock you want to invest in, determine the amount you want to invest. Remember--don’t invest more than you can afford to lose. All stocks are unpredictable, despite the research you’ve done. So plan for the worst and hope for the best. Experts agree that in a new start-up industry like cannabis, it’s harder to pick the winners.
Fourth, Pick a Broker
If you don’t already use a broker, you’ll need one. You can certainly try a more traditional broker like Scottrade, or perhaps use an online broker like E*Trade or Interactive Brokers.
Just fund your account and get ready to buy and sell. Look at what each broker offers. How much research and investing information do they provide? Look at their fees for stock trading, and determine what perks they have like cash bonuses or free trade commission.
Fifth, Have a Buy-Sell Plan
Before you make that first purchase, it is crucial to have a buy-sell plan. Establish your thresholds and stick to them. Tell yourself, “if the stock falls below this particular value or rises above this value, I will sell it.”
Actually buying the stock can be a bit trickier than it seems at first glance. There are two ways to buy: a market order and a limit order. Market orders execute the stock purchase at the present market price. On the other hand, a limit order will only be executed if the stock price falls below the limit price. While limit prices typically offer a lower price of entry for investors, the downside is that the limit order may never execute.
Always have a plan to sell. Typically, when the stock has given you enough returns, sell it. You can also use both market orders and limit orders to sell a stock.
Ready to invest in marijuana stock? It may seem daunting, but if you’re smart, and start slowly, you can make it work for you. Pick a marijuana stock you’ve heard about and start researching it. Pretty soon, you’ll add pot stocks to that list, and you’ll have a great marijuana stock investment strategy.