The legalization of cannabis in Canada helped kick off a financial revolution in the stock market with the launch of a diversified portfolio of marijuana stocks.
With the cannabis public company boom booming, are you considering investing in cannabis businesses? If so, consider starting your journey here.
A wide range of marijuana stocks have made their mark on the global market thanks to the money raised from investors and the attention the sector receives from established industries.
What will happen next is anyone’s guess, but it looks like this burgeoning new industry is still in its infancy, with various nations beginning to move forward with plans to legalize marijuana.
This means that there is likely still money to be made in cannabis stocks as the market develops and the availability of cannabis products increases over the next few years.
But one thing is almost certain: the market is set to grow as opinions around the plant evolve over time and platforms spring up to provide different consumer preferences. And all of this will mean more cannabis investment opportunities with existing businesses and future market entries.
For now, let’s look at where you can invest your money at this point.
How to Invest in Cannabis: Canadian Cannabis Stocks
First thing is first: Canada. This is the obvious place to start, as marijuana is legal in the country and Canadian cannabis stocks are less likely than their US counterparts to suffer from political volatility.
That said, due to the uncertainty of investing in the U.S. marijuana space, where the drug is not federally legal, Canadian companies have been forced to make choices about how to functioning. For example, Canada’s senior exchanges do not allow companies with US cannabis assets to list.
As the Canadian cannabis space has faced challenges over the past year and a half or so, investors are watching with anticipation as companies move into the edibles and beverage markets and develop new products.
How to Invest in Cannabis: US Cannabis Stocks
Although some US states have legalized cannabis, US cannabis stocks can be riskier than those in Canada due to federal restrictions on the sale and cultivation of cannabis.
However, as the saying goes, the greater the risk, the greater the possible reward. The US market could reach $30 billion by 2025, and that’s not even including the size of the market if nationwide legalization occurs. It’s easy to see that U.S. cannabis stocks could inherit a big chunk of the pie if federal law finally legalizes the commodity.
All in all, picking the right US cannabis stocks could mean massive gains if the plant is eventually legalized federally. It is important for investors to do their research and be aware of the potential risks and rewards of investing in space.
For a list of US cannabis stocks to consider, Click here.
How to Invest in Cannabis: A Further Note
Many companies in the cannabis industry have started to veer in one direction or another.
For example, some of the largest marijuana producers have opted for beverage deals or pharmaceutical companies for the production of new products. Others in the space continue to pursue innovation in the leisure market.
An example is Canopy Growth (NYSE:GCC,TSX:WEED), which has teams up with Constellation Brands (NYSE:ZST), a leading producer in the alcoholic beverage industry. Tilray (NASDAQ:TLRY), through its partnership with Sandoz Canadaalso ranks among the top cannabis producers who have commercial agreements with established beverage companies.
Another aspect to consider is whether to pursue large caps or small caps. It has a lot to do with personal comfort. While large caps are often seen as more stable than small caps, in the cannabis industry there has been considerable volatility, even at large companies and especially with Tilray.
How to Invest in Cannabis: Cannabis ETFs
If you really know your cannabis businesses, then you could enjoy bigger gains just by investing in those specific businesses. However, if you’re not too familiar with the cannabis space or are new to it, it might be a good idea to check out Cannabis exchange traded funds (ETFs) available.
A Cannabis ETFs gives you exposure to several different cannabis stocks and takes the guesswork out of picking stocks to bet on. A problem with ETFs is that, like any other group dynamic, if one stock goes down, it causes the whole fund to go down proportionally. Of course, the opposite is also true.
Recently, investors have seen the addition of new ETFs offering exposure to the US market, including companies with entries into the hemp space, thanks to sales of CBD products.
For a list of cannabis ETFs to consider, Click here.
How to Invest in Cannabis: Final Thoughts
No matter how you slice it – or grind it, in this case – the cannabis market is an exciting business to invest in right now. Whether you’re investing in cannabis ETFs or Canadian or US marijuana stocks, or if you’re still waiting for more maturity from the types of cannabis companies trading, this industry is one to watch, and the one that seems to last climbing in the future.
Want more details? Check out these articles for more INNdepth coverage:
Want an overview of investing in cannabis stocks? Check Investing in the cannabis industry.
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Securities Disclosure: I, Melissa Pistilli, have no direct investment interests in any of the companies mentioned in this article.
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