Cannabis is currently legal in most places in the US, with some of its stocks being a publicly-traded business. There is a multi-billion investable cannabis industry that caters to all the enthusiasts. This signifies that users can use their money to invest in some cannabis stocks, which can bring them profit in the long run.
Most investors and experts in finance have inquired about the growing cannabis market. A lot of people are taking a line to benefit from possible financial opportunities in an anticipated new space. On the other hand, people are still wary about the cannabis sector due to the legal and economic restrictions that could arise soon.
If you are a budding investor, looking to enter the marijuana market, then there is no need to hesitate. This article focuses on the major pros and cons of investing in the rapidly evolving cannabis industry. After considering both the pros and cons, you’ll surely be motivated to make a detailed, well-informed decision for your financial future.
Case for: A rising, undervalued market filled with great potential
Most cannabis companies are newly created, as well as their stocks. If the cannabis industry continues to boom, more cannabis companies will become public, and the current companies will expand in size/value. Investing in a weed stock when it’s still low allows the savvy investor to maximize potential profits and returns if you keep investing in this stock for years. Potential investors have the probability of making Amazon IPO levels of money.
There exist several cannabis companies that don’t single-handedly make their weed-based products. For example, The Scotts Miracle-Gro Company ($SMG), makes a lot of profits with plant and lawn care products. The company mostly invests in the acquisitions of cannabis companies intending to diversify their revenue and product offerings further. This can also help them to gain from the cannabis sector in the next couple of years. If you invest in cannabis companies like Scotts and other promising stocks, then you are not putting all your eggs in one basket.
The case against: A risky sector that is highly stigmatized
There are many cannabis stocks, even though some of them are traded on a major exchange. Most are traded on minor stock exchanges such as penny stocks. These stocks deal with fewer regulations and could quickly witness a rise or fall in value. Some could even disappear in a short period, stealing your investments and carrying it with them. These investments tend to be riskier when compared to most other forms of investment, and novice investors are recommended to avoid such investments.
Upcoming rules and regulations governing the cannabis industry could also block the potential of the cannabis industry. The current US Attorney General has shown his dislike for both medical and recreational marijuana. The federal government is currently finding means to implement laws that will put weed companies, growers, and distributors out of business. After Canada legalized recreational cannabis, US citizens were prosecuted for transporting cannabis across the border. This has severely lowered share prices in the process.