Best ways of investing in Marijuana stocks
November 23, 2018 (Investorideas.com Newswire) Marijuana stocks, or more commonly known as weed stocks, are share of stocks that are distributed by cannabis producing companies, and this article will be primarily focusing on the United States' and Canada's stock market. Since cannabis has been widely legalized in many parts of the United States, there have been many positive outcomes that have risen from this, and this is one of the best in regards of capitalizing from this success. The diversity of the marijuana business has gradually been increasing and the amount of investing options around them is now starting to become rather large. This guide will give a good overview on the investing options, best ways of investing in weeds stocks, and give out some tips on maximizing profits.
Introduction to weed stocks
For those people, who are not very familiar with investing, it is recommended to get a proper understanding on what affects the value of stocks in general, and what kind of factors are in play with the volatility of the stock before they start investing in marijuana stocks. Learn about what debt-to-equity ratio (D/E) means, when is the best time to invest, what kind of changes are currently undergoing within the companies, and other matters that might increase or decrease the value of the stock in long term or short term, such as the effect it has, when a company invests on new machinery or such. Additionally, those who have interest in dividends might want to consider other options - weed stocks are a rather new form of investing and it is relatively hard to find proper information on the possible dividends that a company might share with its stockholders.
That said, once the basics are under control, it is time to start diving into the wonderous world of weed stocks. First of all, it is good to take time and think about what kind of business might seem profitable in the future. In case edibles sound like something that might be the future of the weed business, it might be a good idea to start seeking out information about companies such as CannaRoyalty Corp. (OTCQX:CNNRF) or Golden Leaf Holdings (OTCQB:GLDFF). When there is a company that sounds tempting, it is time to invest!
Tips for investors looking to maximize profits
Although it might seem like a very straight-forward process to invest in marijuana stocks, in reality, it can get tricky. While the cannabis industry is largely a developing market area, where there is room for a lot of growth and profitability, blind investing and willful ignorance over the risks can result in only marginal profits, and at worst, even cause one to lose money. Here are few things to take into consideration, before investing in marijuana stocks:
1. Long-term or short-term profit: One of the interesting aspects about weed stocks is the volatility of the market. Some companies have had a hard time maintaining steady growth and this has caused the prices to yo-yo quite a bit for many different stocks. For short-term investments, it is critical to find the best time to invest. Many people think it is as easy as to invest when the price of weed stocks is low and to sell when they reach a certain amount. But the predictability of the stock price changes can vary highly, and suddenly a stock that was presumed to only go down five percent can dip another ten. Therefore, understanding the nature of the investment is important. If one wants to capitalize on safer, less risky weed stock alternatives, it is recommended to approach long-term solutions. Investing in a reliable medical marijuana stock with a good D/E ratio is a good example of a long-term investment, since the future of medical marijuana is known to be rather stable.
2. Local investments: While this may not be a traditional perspective to investing, it might be worthwhile to seek out for a weed stock from a local marijuana producer. Investing on one's local marijuana product company has a few benefits to it. First of all, investing on a company which one already knows and supports will benefit the company directly. Weed stocks that are being bought will increase the financial health and credibility of the company, offering them more room for future growth. Additionally, this ensures a more stable future for the company, which can be beneficial for someone, who wants to ensure that a local company is not going anywhere. While these are all good and positive ways of thinking about investing, it is also good to be realistic. If there are only a handful of companies that are operating locally, and most of them are rather poorly managed with a rather bad financial record, it might be a horrible decision in the end.
3. Management level issues: As previously mentioned, one of the big issues about investing in weed stocks is the way some of the marijuana producing companies are being managed. A rather large portion of the companies, when compared to other industries, are run by people who have turned a hobby into a source of livelihood. The problem that inevitably rises from this is that some companies have high level executives, who might not be as talented with dictating the way the company should go on. In addition to this, while many executives might be talented in the business side of things, the cannabis industry is rather young, which might lead to inadequate experience with the industry. Bad decisions, poor investments, and questionable PR choices have been seen in the past from some companies, which is why looking into the past media coverage of companies can reveal some off putting information. Be aware of this and use caution when investing. A good way of combating this problem is to consider investing in exchange-traded-funds, or as most know them, ETFs. ETFs are funds that operate by trading their stock in the stock market, which means that one can buy a portion of the fund without investing in it directly. There are many upsides to this, such as easy liquidation of allocated money and money that is being invested by professional fund managers, whom are educated in how to maintain a steady profit within a certain area - in this case, marijuana stocks.
Pros and cons of weed stocks
Still not sure whether to invest in marijuana stocks or not? In that case it is a good idea to weigh the pros and cons, and see, whether this kind of investing is a good idea for one's purposes. Below is a short list that has realistically puts into perspective what to expect and what to watch out for, when investing in weed stocks:
- Most likely for the readers of this article, this is an area, which is rather familiar. It is easy to understand, what kind of companies are manufacturing products that are investment worthy, and what kind of companies to stay away from
- Weed stocks are a developing market with lots of potential
- New companies are emerging at an increasing rate, which broadens the amount of marijuana stocks that one can buy
- Investing in something that is being supported by the investor themselves
- Possibly supporting local marijuana producers
- Unreliable investment choice for many
- A slight moral factor; future investors might stray away from investing due to not supporting the companies that are sharing their stocks
- Some level of poor management is being seen from a portion of the companies
For cannabis enthusiasts looking to capitalize on this emerging market that has seen rapid growth in the last few years, and which is predicted to keep growing in a more steady rate, marijuana stocks are a great option. While caution is an important factor, it is the nature of the game, when one starts to get interested in buying stocks. But in case one has good background knowledge about investing, understands what the company is doing and how the company might grow in the future, and is confident in the future of the industry, weed stocks are a way of contributing to the cannabis industry that can provide steady profits over short-term and long-term periods.
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