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How Do I Invest In The Marijuana Stock Market?

By Laura Kuhl
Jul 12, 2018
A PotNetwork Special Report

Investing in the marijuana stock market is no casual endeavor. Cannabis’ projected worth is in the billions, and there is a lot of money to be made —or lost. With this much cash on the table, you need to do your research.

No two pot stocks are alike, and your strategy (or lack thereof) could make or break your cannabis stock investment. If you’re thinking about investing in marijuana stocks like these, read this introduction first. Here is everything you need to know to start investing in the marijuana stock market.

Investing In The Marijuana Stock Market For Beginners

In layman’s terms, investing, whether it’s in weed, or marijuana stocks or anything else means you are giving your money to a company or product in the hope that they will be successful so you can reap a profit. The idea is to create long-term wealth with your investments.

An effective investment strategy will encourage you to invest in strong companies who show promise. You do not want stock in a company, be it cannabis or some other product that you have to check on every day. In fact, studies show that day trading is not as lucrative as it seems. You want a solid investment you can stick with for a long time and trust to perform successfully.

A Quick Word on Small-Cap Marijuana Stocks

This article focuses on investing in marijuana stocks specifically. If you are considering investing in pot stocks, realize that most of them are small-cap investments. Your investment in a cannabis company with a smaller market cap has better odds of growing over a three-to-five year period than other big share companies in the market. You will also avoid the competition that comes along with big company investors.

Making Money With Marijuana Stocks: Do Your Homework

Most marijuana stocks trade on the OTC Markets, although a few like Canopy Growth Corporation (TSX:WEED)(NYSE:CGC) and Cronos Group (NASDAQ:CRON) trade on major exchanges like the New York Stock Exchange and the Nasdaq. In Canada you'll find pot stocks trading on the Toronto Stock Exchange or the Canadian Stock Exchange. You have the potential to earn a lot of money in the marijuana market if you can make educated financial decisions. Read your filings and make sure these cannabis companies are more than just a name on paper. Get to know the company’s staff or board of directors and make sure the brand’s mission matches your attitudes toward the industry.

The Marijuana Index: A Good Place To Start

Start by researching the pot stocks listed on the MJIC Marijuana Index to get an idea of who is out there. The companies on this index are intrinsically involved with cannabis flower and oils. At least half of their business revolves around pot, and you can make a better investment decision knowing where your money is going.

Beware of The Press Release

If you find a lot of information about one specific cannabis company, be aware. Too much good publicity can be a bad sign, so look beyond the company’s press releases. Take advantage of marijuana news sites and message boards to get a more well-rounded view of a cannabis stock. Even your favorite investment will have some bad news every once and awhile. That is completely normal and should be expected. If you are doing your homework, bad news will come as no surprise.

The Marijuana Stock Market Is Sensitive

One of the biggest mistakes new investors make is not considering the precariousness of the marijuana stock market. The ArcView Group calls this “mirror imaging,” meaning that investors assume the market will perform like other markets in its sector. Cannabis, unfortunately, does not play by these rules, and mistakes are made every day by investors who operate under this assumption.

The Politics of Pot

The marijuana stock market is very sensitive to political moves regarding cannabis, especially in the United States. If the White House speaks negatively about pot, marijuana stocks plummet. Even announcements of public listings and positive federal changes can send pot stocks into a frenzy. Cold opens and slow growth are common enough that investors should learn to expect it. Your investment strategy should account for the mutability of the market.

Do Not Invest Alone

The legal standing of marijuana is in a perpetual state of flux, and this impacts the unpredictability of the stocks. Because of this caveat, PotNetwork does not recommend investing in the marijuana stock market all on your own. Not knowing how to invest can stop you from ever starting.

A broker can help you overcome that fear. They can teach you how to read balance sheets and previous earning reports or help you understand why a company is in good or bad standing.

Realize that brokers and other types of financial advisors work for a fee or commission off your investments. You do not need to break the bank paying your broker, but it is wise to invest a little extra up front to use them to your advantage. Their experience will better inform your investment decisions.

Where To Find a Marijuana Stock Broker

You need to make your own decision when it comes to finding a broker. It’s always best to check out a few to see how comfortable you are with them and if they are the right fit. Here’s a list of some brokers to help you start.

Marijuana stock investors in Canada can check out:

For investors in the United States:

There’s also a few on the international markets as well for anyone not living in North America. You may wish to start with QuestTrade, Interactive Brokers, or Nordnet

But Remember In The U.S…

In the United States, marijuana is still illegal. What that means that some advisors may not be legally allowed to tell you how to invest in marijuana stocks or even in which companies to invest. You will need to do a little extra research to find the brokers and advisors available to you.

Online brokerage firms like E*Trade can be beneficial, but if you are working with limited capital, trading apps like Robinhood can give you free trading with low minimums.

Ready To Invest In Marijuana Stocks?

The hardest thing in this industry is simply starting. The information and resources in this article are meant to kick-start your marijuana investment strategy. If you are interested in the marijuana stock market, start doing your research and find yourself a knowledgeable broker.

Pay attention to the news and follow the fluctuations of the market to protect your investments. And do not be afraid to contact cannabis companies directly to meet their board members and understand their mission. With small-cap investments like marijuana stocks, you have more opportunities to learn about this industry and get the most from your investment.

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