Marijuana has been around for many years, and it has been used for recreational and medical purposes. Up to this date, marijuana is still used for the same purpose, but recent developments have made changes on this simple plant as it is now being recognized as very helpful paving the way to its legalization in several places.
The growth of the marijuana industry is fast, and it is not showing signs of slowing down. Because of this, it has attracted entrepreneurs to invest their money in the cannabis business. One of the most important reasons why cannabis has been legalized is because of its medical benefits. Cannabis or marijuana has proven to be effective against a number of medical conditions, and in states where the use of marijuana has been legalized, it can be used alongside a doctor’s prescription for the right kind and dosage.
So you want to invest? You should know how to buy stock in medical marijuana first before investing in a particular cannabis business. Read this article as we give you useful steps that will help you get started.
What is Medical Marijuana?
Marijuana is derived from a cannabis plant. It is made up of hundreds of cannabinoids that give the plant its character and profile. Among the hundreds of cannabinoids, the most prominent are the delta-9-tetrahydrocannabinol, or THC, and the Cannabidiol or CBD. The THC mainly carries the psychoactive compound, which is responsible for the high. On the other hand, the CBD is responsible for the medicinal benefits that we get from this plant.
How to Buy Stock in Medical Marijuana?
The world of marijuana has grown so much over the years. Gone are the days that refer to the use of cannabis as a major taboo in society. The stigma has been slowly broken. Though the use of cannabis is still not legal in many places, the good news is that it is getting popular votes, especially because of its medical benefits. It became more popular as marijuana medical concentrates were developed, giving cannabis consumers easy access in using medical marijuana. The market looks promising, and investing seems to be a good idea. Here are some simple steps on how to buy stock in medical marijuana:
Know the Three Primary Kinds of Marijuana Companies
These are the companies that make up the cannabis industry. By knowing them, you will be able to decide where to put your money.
- Marijuana Biotechs – these are marijuana companies that develop drugs or prescription drugs.
- Marijuana Growers – these are companies that cultivate and breed marijuana.
- Providers of ancillary products and services – these are companies that provide marijuana-related services like consultancy, packaging, lighting system, hydroponics, distribution, among others.
Here are the Steps
- Open up a brokerage account. This is very important because, in order to trade stocks, you would often use an online brokerage that will let you buy and sell stocks. There are easy to access apps that will help you safely seal and monitor your stocks.
- Set your investment budget. A piece of very helpful advice, when you start investing, start small. Know that stocks differ in pricing. Keep in mind that the basic helpful and safe rule is to initially invest only 10% of your portfolio.
- Review cannabis stocks. After creating your brokerage account, it’s time to review some company profiles and stocks. Have a background check. Remember that you are putting your money on this company. Some may be very established, and some are just starting. Study each profile and see which among these companies would most likely be able to avail of your investment and help you with your stock.
Is Investing in Medical Marijuana Stocks Risky?
Frankly, yes, it is risky. You have to be aware of the risks associated with investing in medical marijuana. Here are the three major risks associated with investing in marijuana stocks:
- Valuation Risks – Happens when the valuation of stocks has increased very rapidly that it shares prices more than reflecting the stock’s growth prospects. This when you attempt to determine the worth of your shares based on the fundamentals, allowing you, the investor, to make decisions to either buy or sell your stocks. Without this fundamental value, you will surely grow astray, and it may affect your investment.
- Dilution Risk – this risk happens when the company issues new shares to be able to generate additional capital to be used for funding operations or to expand the business. Dilution can be problematic for a lot of stocks. Because of legal issues, it can be difficult to get bank financing, and if there is any, it can be limited.
- Commoditization risks – This happens most often to marijuana cultivators and to royalty streaming companies. Commoditization happens when the product becomes indistinguishable to other products. It can weaken the price of the product, so the company cannot impose better pricing.
These risks that are associated with investing in medical marijuana stocks can be problematic, and it should not be ignored. These risks, though, are manageable and can be balanced with the potential rewards that medical marijuana stocks can offer.
Is Investing in Medical Marijuana Worth It?
If you are willing to take the risk, then do it. Medical marijuana is very in demand, and the market looks good. It presents risky yet high rewarding propositions. If you are worried about the risks, they are manageable. If you want to start investing in medical marijuana, start small, and see where it leads you. If it gives you a positive result, then perhaps you can add more.
Final Thoughts
The industry of medical marijuana is ever-changing, and it is growing every day. It is not slowing down and not showing any signs in the future. Knowing the basics of how to buy stock in medical marijuana is an important way to start your business venture.