What New Investors Should Know About Buying Cannabis Stocks

High Times

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The era of legal weed is giving marijuana fans and aficionados tons to get excited about. In addition to enjoying open and safe access to the plant, people can engage with the cannabis industry via pot stocks.

Generally, stocks and investing have historically been a male-dominated hobby; possibly due to outdated values involving women staying home to care for children and men handling the financial needs of the family. But those traditions have evolved, and so has technology. Access to stocks is available to anyone who’s interested and has access to a phone or computer. And who doesn’t want to make a little extra green—especially moms, who always seem to be looking for ways to better manage their household’s finances.

Research and Don’t Be Afraid to Ask Questions

Investing in stock, understanding the legalities of cannabis, and making sense of the industry’s idiosyncrasies is daunting to most. It’s a nose-dive into an underground culture full of confusing terms. But with researching and mining the available resources, anyone can become stock savvy.

Among the information you might find while researching, though, are press releases and videos posted by brokerage firms, like TD Ameritrade, urging people to avoid buying cannabis stock. You might also find stories about investors not being able to leave their countries after investing in cannabis stock. And intermixed with all this info, you’ll find stories about people making 10 grand in a matter of hours. All of this might make you ask is it legal? Is it safe?

If anything feels questionable to you talk to your investor, accountant, bank representative or financial advisor. But it’s important to note that apps like RobinHood and Etrade won’t have any illegal companies on their platform. They also make it incredibly easy to invest.

Keep in mind, however, that it may be difficult getting advice about investing in cannabis stocks from a financial adviser or investment firm. Melissa, a mother who wishes to remain semi-anonymous, says she’s considering investing in MedMen—a chain of marijuana dispensaries located in California, Nevada, and New York. Unlike other investments she’s made, though, facilitating the investment through her Texas-based investment firm has proven difficult. This is where an investment app, like RobinHood, comes in handy.

“We have other investments, but due to the restrictions in Texas, the firm isn’t able to swing it on our behalf,” she says.

Ancillary Businesses Versus Companies That Work With the Plant

Matt Karnes of GreenWave Advisors, a company that specializes in managing marijuana-related investments, began his cannabis investment firm four-and-a-half years ago. “It’s an evolving industry where there are a fair amount of charlatans who still exist,” he tells High Times. “So you have to be careful and do your homework.”

Karnes encourages smart investing—rather than aimlessly throwing your money at pot stocks just because your friends are doing it or because it seems like a way to make a quick buck. You can lose a lot of money if you’re not strategic.“I would not put money into a stock just because it’s a pot stock,” he says. “People get caught up in that because it’s en vogue right now. Do your homework and try to understand what the company’s fundamentals are all about before putting your money to work.”

Interestingly, most of the companies Karnes believes are worth following are ancillary businesses. For instance, Karnes believes MJ Freeway, the company that created the cannabis industry’s first seed-to-sale tracking technology and also developed the first enterprise resource planning product, is an attractive investment.

Karnes also gave a shout out to High Times. “[High Times has] a clear brand advantage and a strong management team, so I do think there’s a great opportunity there,” he said. “By and large, I think it should prove to be a successful operation.”

Of the businesses that do handle the plant, Karnes believes Acreage Holdings is one to keep an eye on. “[Acreage Holdings] will go public very soon,” he says. “They have a pedigree of Wall Street veterans and [former House Speaker] John Boehner has recently joined the board of directors.”

The logic behind this, he explains, is that someone like Boehner (for better or worse) would not put his name in a company that didn’t have credibility.

Consider the Big Picture

Karnes also suggests thinking about the long term.  What companies will be sustainable when federal law changes and cannabis becomes universally legal across the United States? “When the laws change, I do believe there are going to be companies that will become less significant,” he says. “For example, some of the banking solutions. When the banking laws change, which they will, there won’t be a need for this interface to comply with banking requirements. When cash is able to be banked like any other industry, you won’t need those kinds of businesses.”

Tara and her husband have done tons of research on the market. By researching, they are strategizing their investments based on the future of federal legalization and its effect on financial institutions. They’re also deciding on an investment amount that works well for both of them. “We’re probably going to go with 1-5 thousand,” she says optimistically. “We see the growth in states where marijuana has been legalized as promising and want to be part of the industry—especially as we expect federal regulations to ease up on U.S. financial institutions in the future.”

Another common misconception about investing is that you have to be rich or spend a lot of money to invest. But we’re here to tell you that’s simply not true.  With some apps (such as RobinHood), investments can start with as little as a few dollars to get the ball rolling. They also allow new investors to watch and learn.

Bridget S., a mother of one, believes there’s nothing wrong with investing a little. “My husband has invested very little, and we are feeling good about it. He is sober so this is just financial interest, and nostalgia for pot use.”

Create Your Strategy

Regardless of how one plans to proceed when it comes to investing in cannabis stock, the future appears to be blazing. Just remember to only invest in the companies you believe in, develop a strategy, and research, research, research! Karnes says we’re essentially in the “second or third inning” of the pot-stock-watching game, so there’s tons of opportunity to get involved.

“It’s not too late,” he says. “We’re only just beginning.”

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