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Be Careful What You Smoke
[Photo: Marijuana Smoke / High Times]
by Howard Haykin
Marijuana as an investment. Interest is certainly growing as states throughout the United States legalize the weed – at present, 11 states plus the District of Columbia have legalized marijuana for recreational use.
For those who seek a way to invest in marijuana, one way is to buy shares of companies that specialize in cultivating and growing cannabis plants – like Canopy Growth (symbol ‘CGC’) and Aurora Cannabis (‘ACB’). For broad-based exposure to many of the biggest players in this “budding” industry, investors can look to exchange traded funds (“ETFs”) - like ETFMG Alternative Harvest (‘MJ’) and Horizons Marijuana Life Sciences (‘HMLSF’).
RISKS ABOUND. Investing in the marijuana industry, however, is fraught with risk. Among other things:
- Federal illegality of marijuana makes it difficult for cannabis companies to get banking services.
- It will probably take 5 to 10 years before legalization at the national level is discussed.
- As more states legalize marijuana, the supply of marijuana will increase – this, in turn, will depress ‘pot’ prices and companies’ earnings.
- Great demand to invest in marijuana offset by a limited number of investment choices, means that marijuana companies tend to be overpriced. In such scenarios, stock prices usually fall before they continue to rise.
GOING FORWARD. Before committing any money, investors should familiarize themselves with the universe of marijuana investments. To start, read these introductory articles: A Cloudy Future for Pot ETFs (WealthManagement), and The Top Marijuana ETFs for 2019 (MotleyFool).
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