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Is It a Good Idea to Invest in Marijuana Stocks?
Throughout the developed world, countries are starting to loosen their stances on cannabis. In Canada, for example, cannabis is now legal for both medicinal and recreational purposes. Accordingly, companies have started springing up to take advantage of the new market, focusing on growing, cultivating, distribution, or some other phase of the process; you can even buy cannabis online thanks to businesses like Bud Buddies.
In the United States, the momentum seems to be headed in this direction. There are 10 states that have fully legalized marijuana, while the majority of other states have decriminalized it and/or allowed it for medicinal purposes. Along multiple links in the cannabis supply chain, we’re seeing the rise of new startups. These companies often go public in an attempt to raise funds for their new operations, giving rise to the moniker “marijuana stocks.” So is it a good idea to invest in these up-and-coming companies, which are hoping to take over a new industry?
The Allure of Marijuana Stocks
The allure and advantages of marijuana stocks are apparent even to someone with minimal investing experience. Cannabis has been illegal, and therefore an off-limits area of business development, for a century—yet there’s clearly already a strong market for marijuana, and that market might grow further when the drug inevitably becomes legalized. Investing in a marijuana company now is akin to getting in at the ground floor; you’ll be investing in the company’s earliest days, when it’s extremely cheap to do so. If the company expands to a national level and dominates their area of specialty, it could hypothetically make you rich.
It’s estimated that the global market for marijuana will more than triple from 2018 to 2022, and much of that growth could be concentrated in the United States. If this estimation proves to be true, there will undeniably be some big winners; several marijuana stocks will make enormous jumps, ultimately returning investments many, many times over.
The Complicating Factors
That may all sound good, but there are several complicating factors that throw a wrench in this picturesque vision of marijuana stock investment:
So should you invest in marijuana stocks? They could be a valuable opportunity, but only if you truly understand the business model and the risks involved. Investing in the industry blindly is only going to result in disappointment.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes.