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How to Invest in Marijuana: Stocks and Bonds Part 4

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Getting Started with Marijuana Investing

If you see what many people see—a potential gold rush—then you’re narrowing down your investor’s research to one very central question: should you invest or shouldn’t you? That’s exactly what we’ll address in the next few sections.

Should You Invest?

 

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This may be the most central question of them all. Unfortunately, it’s not an easy one to answer. Whether or not you should invest in marijuana stocks depends entirely on your personality as an investor. Are you experienced? Are you inexperienced? Have you done your research and homework on individual marijuana stocks, or are you simply interested in “getting one” so you can be part of the overall gold rush?

You should invest in whatever is safe and legal for you to invest in, so long as you also believe that investment fulfills some part of your overall investment strategy. If marijuana investments add something to your portfolio that you want added, then that’s a great addition. If not, you may want to think twice; sometimes it’s good to even pass up a “good” opportunity in favor of long-term advantages and stable growth.

In the next few sections, we’ll take a closer look at discerning whether or not investing in this field might be right for your portfolio.

Step One: Viability


Take a look at each company’s business model, the same way you’d examine the business model of any other company which you’re considering investing in. Is the company stable? Do you like its numbers, its revenues, its costs, its market share, etc.? Or do you have some concerns?

The key here: Determining the viability of an individual company is no different than determining the viability of any other investment despite what you might think about the field. It’s not enough to say “marijuana stocks will grow.” You have to pick and choose the best investments, the ones that you believe will be stable and growing. If not, you are simply spinning your wheels; you could be likened to a gold prospector who didn’t take the time to properly research what gold mining and panning for gold was all about.

The main lesson here: keep a cool head.

Avoid High-Risk Penny Stocks, and Other Tips for Keeping Your Investment Stable

It’s tempting to look at penny stocks as a potential way to break into a new investment and earn a lot of money. And certainly some people have made a pretty “penny” doing exactly that. However, just because someone has succeeded with a specific strategy does not mean that you will; it may not even mean that the strategy is the best strategy for everyone.

Avoiding the highest risk penny stocks will help you to keep a cool head and examine the investments with a more discerning eye. If you must have a penny stock, choose one that makes sense to you. Don’t simply pick the first one to come across your Google page. Take the time to examine the numbers.

Similarly, remember that your marijuana investments should be part of an overall portfolio. Consider what role they’ll play. If you consider marijuana investments high-risk, then don’t let them take a greater percentage of your portfolio that you’ve set aside for high-risk investments.

Know the Players

In taking on the marijuana industry as a potential choice for investment, you should approach it like any other industry: learn the “who” first.

You saw in the previous section about “Who’s Who” in the marijuana stock market that there are some companies that fetch more attention than others—usually, for good reason. It’s important to have an idea about these things because it will allow you to understand the greater context of the industry and know which “standard-bearers” can serve as a measuring stick for other stocks you might want to pursue.

In taking on the marijuana industry as a potential choice for investment, you should approach it like any other industry: learn the “who” first. Get an idea for some of the top companies, some of which have been mentioned in this very article, and you’ll have a better idea of exactly what is going on in the industry. And as you research some of the lesser-known companies and penny stocks, you’ll know a lot more about the industry as a whole so that you can have the appropriate context for viewing each stock.

How to Track Marijuana Stock Performance

Are you interested in watching the marijuana industry grow before you make any moves? Then it might be a good choice to simply sit back and watch. However, you shouldn’t take this to mean that you should be passive; no, instead take an active role in understanding what’s going on in this particular stock segment.

You can do this by picking some of the stocks you believe will perform the best in the coming months. Many online stock brokers offer automated “stock watcher” options that allow you to track the stocks that have gained your interest. Take full advantage of these features! Watch the news and see how your stocks ‘ value responds to the new. Every day, something new is happening in this industry; it’s important to not only understand the who of the industry, but the when. Getting your timing right is one of the most underrated aspects of investing.

The “Marijuana Index”

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Don’t have the time to look at the individual stocks? You may want to consult the “Marijuana Index.”

This index is not exactly the S&P 500, but it does do a good job of showing you where the marijuana industry is at. If you’re interested in the industry but haven’t looked at individual stocks yet, then you may want to pay particular attention to this ‘index’ and keep up on the latest news as well. Understanding how the “index” reacts to various news events can really help you understand market timing.

It’s in this index that you can identify potential stocks to buy, as well. Doing your research with this index as a baseline or a guide, you’ll be able to identify all sorts of companies that you hadn’t thought of, perhaps even when you were doing your serious research into the industry.

Continue to How to Invest in Marijuana: Cash In Now Part 5>>

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