A question on how to invest in medical cannabis comes to mind to a lot of business people and also for those who just want to know. This is because of the legalization of medical marijuana; a lot of people want to join the growing industry and want to earn more before the playing field becomes overly saturated. Medical Cannabis may not be as widespread and as big as recreational marijuana, it still has the capability of earning millions of dollars. Medical marijuana is a safe choice because recreational cannabis is still illegal at the federal government level.
In this article, you will know how to invest in medical marijuana and also gain knowledge about the importance of investing in this industry. Read on to learn more.
A Guide on How to Invest in Medical Cannabis Stocks
Existing investors and new investors can tap into the cannabis market by doing the same process as obtaining company stocks; it can be by buying individual stocks or ETFs that consolidate assets from the people to invest in marijuana firms by buying their stocks.
ETFs are very different from mutual funds, ETFs can be traded at any day and at any time of the day as long as the market is open. At the same time, mutual funds can only be traded one-time per day. This means that by investing using ETFs, you will have freedom and options on how you will be using your assets. And since ETFs have the same method of trading, there are certain commission fees involved, and also, since they have a working system that consolidates and collects investments from people, they have annual fees, which are one disadvantage.
As for the individual stock investors, sadly, the medical marijuana companies do not own a seat in the NYSE (New York Stock Exchange) yet. Since recreational marijuana is still considered an illegal substance at a federal level, it is hard for the medical marijuana field to enter the main stage exchange market. Instead, it can only be traded in an OTC (over the counter) market with less strict regulations.
The danger is over the counter stocks is the high risk of fraudulent activities because the investor’s information can be exposed by the market. Since the OTC exchange is not well regulated, you may not get the target amount that you want when buying or selling stocks.
However, the tides change direction when it comes to Canada. The good thing about the cannabis industry in Canada is the legalization of both recreational and medical marijuana. This means that big cannabis companies are registered in the major stock exchange market. You may invest in this playing field freely. However, the disadvantage of this is the higher commission in trading and other conversion fees since the US and Canada do not share the same currency.
The good news for you is that back in 2018, a lot of cannabis giants that are based in Canada are now registered and can be traded in the NYSE and NASDAQ. However, these firms can only operate in Canada, where they are legal entities.
The individual stocks that are worth your money is in your hands, this article is merely a guide, but with your expertise, surely you can beat the system. However, here’s the list of different types of cannabis stocks that you might be interested in obtaining.
Types of Marijuana Stocks
These are local operators that own plantations, greenhouses as well as indoor growing facilities. These local growers can produce higher yields with lesser operational costs. Also, since they have control over the growing environment, they can dictate how the quality of the product comes out. Also, these local growers may dictate the price of the products depending on the quality and medical potency. They play a huge role in the medical cannabis field.
Cannabis extracts are processed using chemical extraction techniques to make sure that the products are pure and powerful. These extracts are widely used in varieties of products across the globe, such as oils, ointments, lotions, shampoos, and even beverages. Some companies are only focused on the extraction side of the business since they have the hardest job, and they can dictate how prices should be set. Thus, they have higher profit margins.
For a very long time, cannabis has been used in the medical field, especially in China. However, due to issues in legal matters in the US, pharmaceutical companies can only do research and cannot conduct tests to prove that cannabis-based products are effective. But now, this has changed, pharmaceuticals can now run tests, experiments and can even sell their products in the market. This is a promising industry that a lot of investors must observe.
One factor in the success of most cannabis companies is the proper distribution. The proper supply chain management must encompass the whole market from top to bottom tiers. This is where dispensaries come into play; they have the widest reach and contribute to the majority of the sales. They have contracts and agreements from big firms and growers to market their products, which ends up in the growth of both sectors.
These are the companies that produce all the tools and equipment that every grower, dispensary, medical facility, and extraction facility needs. They cover the whole cannabis playing field. Due to the wide variety of products, they help these mentioned sectors to increase productivity and lessen the cost of production.
Every type of industry and market is not made equal, and that also means that every investment carries a risk. This is evident in the marijuana industry, although the medical cannabis field is stable over the years, they still have a long way to go. They are still considered infants due to the duration of their operations; they still have to prove that they can manage their operations and their company as a whole. The playing field will surely change and skyrocket when certain legalizations and approvals are met.
Overall, investing in medical cannabis firms have potential risks but promising returns. What is needed to be done is proper research and observation before making a move; it is always better to observe the market first. The market shows promise. Therefore you may try to take risks and ride the tide while it’s high. This is how to invest in medical marijuana.