By: Jacob Ellman
Whether you love weed, wine or coffee, you need to admit that marijuana is seeing a banner couple of years.
It’s also now clear that cannabis is the new gold rush. Last year the industry generated $7.1 billion that flowed into governments, as well as into the pockets of entrepreneurs, farmers and investors. With so many states hopping on the legalization train following the November election, marijuana reform has the people’s’ vote and they are looking to get rich.
But are you savvy enough to invest and receive some solid returns? Let’s be clear: it’s unrealistic to think $10 invested would yield $1 million in six months It’s more likely $10 invested might get you $20 in a year or two.
This leads us to the questions in focus – how do I invest in the blossoming cannabis industry? and how do I do it in a smart way?
Let’s give you a primary on how to invest. and you can start for as low as $25!
How To Invest In The Cannabis Industry
When you buy stock in a company, you’re buying equity a.k.a. a piece of the company. For the average person considering putting some hard earned cash into the industry, publicly listed and exchange traded names are where to look. Just as you would with any other stock, you’ll need a brokerage account to buy or sell.
Almost any online broker-dealer will allow you to buy and sell shares of cannabis-related companies, but it’s always a good idea to ask them to be sure. Now that you’re able to access the markets…you must decide how to invest.
Diversify In The Cannabis Industry
In every industry, there will be winners and losers. If you aren’t following the industry’s ins and outs enough to confidently pick the winners and avoid the losers, than you may fall into the trap. You’ve probably heard the age old saying “don’t put all of your eggs in one basket,” and this is what they’re talking about. This is where diversification comes in.
If you choose to put all of your money into cannabis companies…you better really believe in the future of the industry. Beyond that, to put all of your money into one or two specific cannabis companies can be risky. To avoid these common pitfalls of investing, seek out diversification in your portfolio.
Beyond that, diversify within the cannabis landscape. In the world of weed there’s cultivators, retailers, grow light manufacturers, packaging companies and more. Don’t go all in on just one!
Diversification sounds easier than it actually is, right? Wrong! It’s actually easier to diversify than you’d think. Below are a few different strategies to diversify exposure within the growing marijuana industry.
- Go for a diversified company: For those who are looking to diversify within cannabis, one of the favorites on Wall Street has to be CannaRoyalty Corp. (CSE:CRZ) (OTC:CNNRF) (FRA:CY4). Started by Wall Street veterans, CannaRoyalty Corp. now has an impressive platform of 24 different holdings across high-value areas of the cannabis world – research, devices, brands and intellectual property.
- Invest in a marijuana-focused mutual fund: For those who are most comfortable with a managed fund approach to cannabis investing, they should take a look at the first and only marijuana-focused mutual fund, The American Growth Fund Series II (MUTF:AMREX). Granted, the fees are sky-high, but with a professional money manager at the helm, this may be a good option for those with the set-it-and-forget-it mentality.
- Invest in the upcoming marijuana-focused ETF: Not available yet, but coming soon is the Emerging AgroSphere ETF. According to the fund’s prospectus filed with the SEC, the ETF will invest in the non-recreational and supply chain side of the cannabis world, hence the AgroSphere.
Hopefully this was a useful beginner’s guide to investing in the cannabis industry. As a reminder, this article is for informational purposes only, and the information contained herein is not a recommendation to buy or sell any securities. You should always consult your financial advisor before making an investment decision.