The marijuana stock investing in the cannabis industry is getting bigger each and every day and the trend simply continues growing further on. New deals are announced almost every day and merger and acquisition activity at an all-time high. This is backed up by stats that show the growth of the marijuana industry reaching $6.6 billion in the first 10 months of 2018. Furthermore, according to New Frontier Data, sales are expected to surpass $9.5 billion in 2018 — with MJBizDaily forecasting sales of up to $12 billion.
This only makes investors consider the marijuana stock investing and take this entire trend seriously because it surely evolves into something more serious. This once recreational-only industry is not larger and hotter than ever. In this context, marijuana-related companies are definitely reaching the mainstream, trading on major stock exchanges with serious yields.
While smaller companies have delivered astronomic returns (and losses) in the past few years, more established ones have been performing steadily, in spite of the volatility inherent to the industry. However, with all this marijuana stock industry still not being completely standardized as other industries are, investors find it hard to separate the good, prosperous companies from the bad ones. There surely are many differences between legit promising marijuana stock companies and bad ones that will only cause you to lose your invested money. So, speaking of this we have decided to comply a short marijuana stock guide where we tell you how to pick the right marijuana stock and invest properly, how to recognize a good, prosperous company, and also which are the most promising ones at the moment.
Marijuana Stock: How to invest
First and foremost it is important to know that investing in cannabis is not limited to growers or retailers. In fact, there is a variety of companies providing ancillary services to the industry, as well as many derivative plays, like pharma and biotech companies making cannabinoid-based drugs and service/product providers that used to operate outside the marijuana industry but have gotten on board since legalization. These are also to be considered as an option when talking about investing in a marijuana stock.
However, there is a problem with the “over-the-counter” companies as they are legal by state law in the U.S but still illegal on a Federal level – classified as a Schedule I drug by the DEA. This has made it difficult for most companies to get listed on the Nasdaq or the NYSE. Seeking alternative avenues to raise capital, many businesses have gone public in Canadian exchanges for marijuana stock, while others have done so by trading on over-the-counter U.S. exchanges. This means that many publicly traded cannabis companies are not subject to the same level of scrutiny that major exchanges and the SEC impose.
The Marijuana Stock Guide
There are some crucial steps that you need to undertake if you want to be successful in the marijuana stock business. Some people invest in these stocks as a side income gain, some make it a full-time job, but whatever the form of it may be, they all follow these rules:
HEAVY RESEARCH ON THE COMPANY: Whatever you start with, you should always do thorough research. Especially when it comes to investing money. You can do so by checking SEC filings and other documents required by diverse regulatory agencies. Also, read the latest news on these companies in the site like Yahoo Finance and get a feel for the market sentiment using Twitter or Stocktwits.
SETTING THE RIGHT AMOUNT: This is another rule that will help you keep up with your finances in the marijuana stock market. Truth is, you have to have your finances in control because it is foolish (to say the least) to invest more than you can afford to lose. Because let’s face it, there is always that risk of losing. While good research will often lead to strong returns, this will not necessarily be the case. Stocks are volatile and contingencies sometimes unpredictable.
SETTING UP A TIMELINE: Another crucial step into setting your marijuana stock game right is to have a strictly-determined timeline that you will follow no matter what. While it is good to be flexible and take some risks here and there when doing business in the marijuana stock exchange, having a timeline on when to buy and when to sell is of utmost importance. Try and figure out what your thresholds are beforehand. So, for instance, establish a rule: “if the stock falls below X or surges above Y, I’ll sell.” You should never risk your profits by hoping that it’ll get better. Hope and good thoughts have no place in serious business. So, set up a timeline and follow it without including your emotions in it.
FINDING THE RIGHT BROKER: Now that you have done your research on the best company and you know how much money you can invest and in which timeline, you are practically ready to actually buy your shares on the marijuana stock. However, this is when a good broker comes into play. Choosing the right person for your portfolio is probably one of the most important steps because ultimately he can give you advice and recommend companies and a suitable timeline for each.
BUYING THE MARIJUANA STOCK: Although this step sounds quite self-explanatory, things do tend to get a bit more complicated. Sometimes these complications can be avoided with the right experience and knowledge. So read on.
Basically, there are two types of ‘buy’ orders: market order and a limit order. A market order will execute the purchase at the present market price, while a limit order will only execute if the price falls at or below the limit price. Although a limit price might give an investor a lower price of entry, there is no guarantee that the limit order will execute.
SELLING THE MARIJUANA STOCK: As we said, you should always follow your timeline and plan for buying and selling the marijuana stocks. So, once you have hit the time period that you have previously set, or the amount that your marijuana stock has earned you, it is time to sell. This is where you shouldn’t get greedy and wait a while longer because the stocks may experience a sudden drop where you will lose the opportunistic income of it. Here again, you can sell the stock with a market order or a limit order. Use your proceeds to reinvest or just spend them. After all, life is meant for living!