The marijuana industry is taking off. Marijuana is now legal for recreational use in 11 U.S. states, and legal for medical use in many others. What’s more, Canada has quickly become a hotspot for legal weed as it’s now legal for adults for all purposes. Anyone aged 19 or over (and even 18 in some provinces) can easily buy weed online or in cannabis stores.
Being a fast-growing market, many people are now wondering how to invest in marijuana. After all, the industry is set to grow even further as marijuana becomes more accepted and available across the world. Just like with any industry, investing in marijuana companies is always a gamble. However, it’s also one of the most promising industries right now for investors.
There are now many stock exchanges with valuable marijuana stocks. If you do your research, diversity your portfolio, and pick the right stocks, you could stand to earn a lot of money. There are multiple ways you can start investing- many users use traditional brick-and-mortar growers but you can even use online stock exchanges nowadays. You could even invest directly in companies.
Whichever way, it’s well worth learning how to invest in marijuana in 2020 as the industry shows tons of promise. Here’s a guide on how to invest in marijuana, the risks to watch out for, and some of the best marijuana stocks right now.
Why Invest In Marijuana?
Whether you’re interested in the marijuana industry, trying to diversify your stock portfolio or simply want to start investing your money, investing in marijuana right now is a great idea for numerous reasons. Marijuana continues to become legal in more U.S. states as well as all over Canada and a few other countries. It’s also likely more places will soon follow.
Even though the legal marijuana market is currently limited to certain places, it’s still a highly lucrative sector when it comes to investments. A February 2020 report from Grand View Research estimates that the global legal marijuana market size will reach USD 73.6 billion (CAD 98.7 billion) by 2027.
There are now many exciting marijuana companies to invest in, especially in the United States and Canada. The earlier you invest in these, the more they have the potential to grow over the upcoming years- especially as marijuana sales grow and consumers become more accustomed to buying legal marijuana.
Plus, along with the increase in consumer demand for marijuana, many other types of marijuana companies are also growing. Marijuana growers are needed to fulfill the needs of stores and dispensaries. There are also many ancillary services and tech companies profiting from the slew of new marijuana businesses.
You can now find marijuana stocks on many major stock exchanges. Much like with any other stocks, you’ll need to do your due diligence first and accept the risks. However, with the industry showing huge potential for growth, it’s well worth investing if you’re interested.
Risks Of Investing In Marijuana
There are always risks when it comes to investing in stocks. While you stand to gain a lot of money if the stocks grow in value, there’s also the potential they lose value. Some unique risks also come with investing in a fairly volatile industry.
You should always research the stocks you want to invest in before investing any money. While many new investors are attracted to the biggest or most popular stocks, these often come at much higher prices. They may also be overvalued, leaving you open to much larger falls. That’s not to say you should avoid them- just look into them thoroughly to determine how much potential they have to grow.
Lower-priced stocks can also look attractive, and many of these can even be hidden gems when it comes to investing. But again, you’ll need to research them and see whether they look like a good investment. Many online resources are out there that give you financial details for companies, including their profit margins and estimated growth. You should also look into their management structures and plans for the future.
You should also keep in mind that investing in marijuana companies in some places can still be risky. For instance, marijuana is still illegal at the federal level in the United States. Although it’s now legal in many states, there are still legal restrictions that can make it harder for them to operate.
Laws on marijuana in the United States could change for better or worse in the future, although it currently looks as though marijuana laws will continue to become more lenient. You can also focus on stocks in other countries such as Canada, where marijuana is fully legal for adult consumers. There are also other options such as pharmaceutical companies focusing on cannabinoid-based medicines.
How To Invest In Marijuana Stocks
There are a few ways you can invest in stocks and also a few steps you should take before you start investing. Before anything else, you should consider how much of your money you want to invest. Setting a budget and putting some money aside can help ensure you don’t risk too much of your money.
For instance, if you’re a complete beginner and want to dabble in marijuana stocks, you might want to use around 10% of your savings. However, you might want to use more or less depending on the price of the stocks you’re looking at and how confident you are in them.
You should also consider how long you’re willing to leave your money tied up in investments. A good rule of thumb is to be willing to invest for at least three to five years to give the stock market time to recover after a downturn. However, you might want to set rules for yourself such as selling once your stocks reach a certain price (either higher or lower).
Once you’re ready to invest, you’ll need to find a broker. You can go to a physical broker and even talk to a financial advisor. However, many people nowadays opt to use online brokers- these generally make things cheaper and easier. You can use a full-service online broker if you want financial guidance, but many users prefer to simply pick investments themselves.
After signing up with a broker, it’s generally a case of buying the stocks you’re interested in and selling them once you’ve gained enough returns. Stocks can go up and down and it’s usually best to invest in multiple stocks to reduce the risk of losing money.
Types Of Marijuana Stocks
If you’re looking to invest in marijuana-based companies, you have a few options. While many investors will go straight for cannabis retailers, you might also want to consider other types of companies in the industry that also have massive potential for growth.
Marijuana retailers are the most obvious choice for most users. This includes companies that operate legal cannabis stores and medical marijuana dispensaries. You can find many stocks for companies that operate multiple different retail operations, often covering both recreational and medical. Consider that retailers often have a lot of competition, so look into their growth strategy and how their brands are performing.
You can also invest in marijuana growers. As the demand for legal weed grows, these companies are becoming increasingly important to provide the stock that stores and dispensaries need. Growers have the potential for impressive profits and some even supply weed to entire Candian provinces.
Some of the best cannabis-related stocks to invest in are pharmaceutical companies. Medical marijuana is still illegal in many countries, and these companies provide cannabinoid-based medicines to such countries. These stocks are often particularly valuable as they can appeal to international markets.
You can also consider the closely-related CBD industry. CBD products made from hemp continue to grow in popularity, especially in U.S. states and countries where medical marijuana is still illegal. Many companies that sell marijuana also sell CBD products and these can also make for promising investments.
Finally, there are ancillary products and services related to cannabis. This includes companies covering things like vape products, devices for smoking, marijuana packaging, and B2B services targeted at the marijuana industry.
Best Marijuana Stocks In 2020
Between the well-known industry giants and lesser-known hidden gems, there are many great marijuana stocks that could be valuable investments. There’s no guarantee on which stocks will grow and it’s always best to do some research, but here are some of the most promising marijuana stocks in 2020.
The Valens Company (CVE: VLNS) – The Valens Company, previously known as Valens Groworks, is a BC-based cannabis company that produces a range of products for both the recreational and medical markets. They produce all kinds of cannabis-infused products including tinctures, edibles, capsules, and even beverages.
These products are becoming increasingly popular for cannabis consumers. The Valens Company has an impressive output and has even begun shipping products overseas. If you’re looking for a valuable cannabis stock with plenty of room to grow, this is one of the best.
Aphria Inc (TSE: APHA) – For a long time, Aphria Inc has been one of the most popular Canadian cannabis stocks to buy. The company has moved from focusing on high-quality medical cannabis to also catering to the recreational market. Along with cannabis strains, they also produce a range of cannabis-infused products.
Aphria Inc has had a tumultuous year and their stock prices could continue to drop. However, with the stock prices being low right now, it could be a good time to buy. As the legal cannabis infrastructure improves in Canada, Aphria has more potential to profit. The company also has a contract to produce a ton of cannabis for Germany each year- a market with huge demand for cannabis.
MediPharm Labs (TSE: LABS) – Although MediPharm stock lost a lot of value in the past few months, it has great potential to grow again in 2020. The Canadian cannabis company is set to provide cannabis-infused products such as cannabis oils, topicals, and edibles to multiple provinces.
MediPharm Labs is well-financed and as supply and retail issues are ironed out across the country, the company stands to grow more than ever. The stock is currently low and could be a fantastic investment if you’re willing to hold on for a while.
Village Farms International (NASDAQ: VFF) – Village Farms International is a growing company with many greenhouses producing vegetables. However, interestingly enough, Village Farms recently set its foot into the marijuana industry and has become a valuable stock for marijuana investors.
The company plans to dedicate 2.2 million square feet of greenhouses to growing cannabis. As well as producing cannabis products, they also plan to supply to the fast-growing hemp market. If you’re looking to invest in a cannabis grower, this stock is a top pick.
How To Invest In Marijuana Businesses
If you’re looking for a way to invest your money in the marijuana industry, then investing in stocks isn’t your only option. You may also be interested in investing directly in marijuana businesses instead.
With tons of exciting new marijuana startups emerging, you might want to consider becoming a marijuana business investor. This will likely take much more research than simply investing in stocks and also comes with many risks. However, if you make the right investments, the rewards will be worth it.
You may want to start by joining marijuana investor groups on platforms such as LinkedIn. You can also find companies looking for investors through cannabis business directories. Since many marijuana businesses are unable to get bank loans, they often turn to investors to fund their startup.
This approach is generally best for experienced individuals with plenty of money to invest. Nonetheless, it’s an idea well worth considering if you want to ride the wave of the growing marijuana industry.
It’s a great time to invest in marijuana, especially as 2020 is set to be a good year for the industry and reports estimate it’ll grow even more over the next few years. While you shouldn’t rush into investing without doing your research, there are many valuable stocks whether you’re interested in growers, retailers or cannabis-related biotechs. Invest in marijuana now and you could be looking at significant gains over the next few years.