How To Create a Smart Investment Strategy for Marijuana Stocks


It’s interesting enough to read through lists of the best stocks to buy when it comes to investing in marijuana stocks, but, how does one actually get started? The United States has already invested a whopping $3 billion in pot stocks during this year alone. What are the major differences in the marijuana sector which separate trading cannabis stocks from technology or commodity stocks?

The first step of developing a smart investment strategy requires understanding the difference between marijuana stocks and various other “traditional” stocks.

Stocks which are traded on the New York Stock Exchange (NYSE) or NASDAQ must fulfill specific requirements to be admissible. Most marijuana stock companies, with the exception of companies like Cronos Group (NASDAQ:CRON)GW Pharmaceuticals (NASDAQ:GWPH), and Canopy Growth Corp. (NYSE: CGC), are not able to meet these requirements and are, therefore, listed largely on Over-The-Counter (OTC) stocks or, most commonly called, “penny stocks.”

Marijuana is still considered a DEA Schedule I drug and, therefore, illegal on the federal front in the United States. This prohibits many cannabis companies from having the same resources as other traditional businesses (such as access to banking services). The government still requires income taxes from these businesses and, without the ability to take out the traditional business deductions from their returns, pot stock companies take a big hit (in the worst possible way). Their stocks can trade on the OTC since the SEC rules are not as restrictive as the NYSE or NASDAQ.

A cheap stock should not automatically indicate a “bad stock,” though, penny stocks do come with higher risks and volatility. Leslie Bocskor, an investment banker and the President of Electrum Partners interviewed with Benzinga and noted, “There is a prejudice against low priced stocks that I think we need to get away from as an industry and start looking towards reverse splitting our stocks, having fewer numbers of shares and higher prices because the optics on it are better,” Bocskor voiced.

For the new or risk-averse investor, there are marijuana ETFs from which to choose vetted by analysts prior to inclusion in the fun.

Performing due diligence and research on what cannabis stocks to buy takes time and energy. For those who want to get started investing in marijuana stocks without very much capital or time, there are exchange-traded-funds, or ETFs, geared towards making investments in the marijuana sector. Specialists will pre-select stocks based on thorough company research.

Among the options to consider are Evolve Marijuana ETF (SEED.TO),  the ETFMG Alternative Harvest ETF (NYSE:MJ), and the Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF) (TSE:HMMJ).

When researching marijuana stocks to invest in, what does it take to weed out the bad seeds?

Read up on the companies in which you are interested and remember to verify your sources. After all, if a rave review article on one stock was written by the company or a paid affiliate, you may want to seek out a less biased opinion about the stock and listen to your own gut when reviewing the business practices of the company in question.

Many eyes are turning to Canadian weed stocks in light of the recent legalization of recreational marijuana just this summer. Some analysts feel this strategy makes sense, but, Canadian stocks are overvalued without the performance to justify the investment at this time. Canada may have some competition in the states if one researches the California cannabis market all on its own and how profitable it has been in spite of the DEA Schedule.

As with any kind of stock, never invest more in marijuana stocks than you can afford to lose.

After finding a company which intrigues you, a company you want to see succeed, consider your own success – don’t put all your dollars into one stock if you need all those dollars. Marijuana stocks are not a “get-rich-quick-scheme” and only time will tell how their performance will add up for businesses and investors alike.

The stock market is unpredictable no matter how much effort you’ve put into your research. In such a new emerging industry, it’s nearly impossible to pick downright winners, so, prepare yourself to exit and start over based on how your cannabis stocks play out.

Finding a qualified financial advisor could be one of the smartest steps of a marijuana stocks investment strategy.

Finding an experienced advisor who specializes in choosing marijuana stocks could be an invaluable asset to cultivating your cannabis portfolio. Choosing an advisor of the caliber of individuals, resources, and groups such as Jeff Siegel, Green Chip Stocks, and The Cannalysts would be a great way to get started.

Siegel would recommend stocks such as Innovative Industrial Properties (NYSE:IIPR) and MariMed (OTC:MRMD). Still, remember growers are not the only options for investing in cannabis. To learn more about other ways to get your foot in the door with investing in marijuana, read Is Now the Right Time to Invest in Marijuana Stocks?

Lastly, find a good broker when trying to get in on the marijuana stocks scene.

If you are new to investing, a broker could be an essential ingredient to your success. There are traditional, in-person brokers to scout as well as online options. Whatever makes you the most comfortable will be an asset to your journey into marijuana stocks.

Thoroughly review what your options in brokers offer and evaluate the fees against the potential rewards. Find out if they provide research services and if you’re in a position in which this would greatly serve your goals.


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