How to Invest: Marijuanna Investment Scams

“The con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success.”

Tips and Advice
Are you unsure about where to go from here? Let’s get into the nitty gritty of investing in these types of stocks. Here you’ll find our realistic approach to tips and advice in this industry.

Tip #1: This industry is highly speculative. It just is. No one knows what its ceiling may be, if it has a ceiling, or which stocks will perform will and which won’t. No matter what your experience and expertise in the field, there are simply too many market, political, and legal factors at work to make any realistic prediction about where this industry is headed. The second that you think you have it figured out is likely the one where you’ll have the rug pulled out from under you. So remember that this industry is indeed highly speculative, which means that it can be risky for uninformed investors.

If that’s a problem for you, keep this in mind: you can always up your chances by doing research and becoming informed!

Tip #2: Watch out for scams. The gold rush was a period in history rife with fool’s gold and all manner of scams and fraudulent claims. That can be the trouble with speculative industries like this, which is why you should keep a keen eye out for any potential scams.

Don’t believe us? Look at what FINRA, the Financial Industry Regulatory Agency, warned about last year. Said the press release: “The con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success.”

Our advice: caveat emptor.

Tip #3: Keep your allocations small. If there is a lot of potential in these stocks and in this industry, you should have no problem allocating a small portion of your portfolio to marijuana investments. This mitigates your risk while also giving you the potential to get a great return on your investment; in essence, it’s the best of both worlds. Yes, if you bet big, you always stand to win big, but that doesn’t mean that betting big is always the best strategy. If that were true, anyone could have success at the casino.

Tip #4: Don’t put all of your eggs in one basket. Although it’s enticing to invest in this industry, that doesn’t mean that any one particular stock will do it for you. It can be helpful to spread your investment across a few different stocks—you never know which stock will be the one to surprise you. If you do your investment research right, you should notice that more than one stock strikes you as one with good potential. You don’t necessarily have to pick between them! You can spread your investments around, just as you do in constructing your own financial and investment portfolio.

Tip #5: Don’t forget about Canada! With all of the hubbub about marijuana legalization and decriminalization in the United States, it’s easy to forget that there are plenty of Canadian companies worth considering. Keep in mind that Canadian laws may become less restrictive in the future, particularly to medical marijuana, and that there are many legitimate businesses that may play a part in this business environment. Ignoring the Canadian presence of marijuana companies while focusing exclusively on the United States may be a strategy for your ultimate investment decision, but it shouldn’t be how you go about researching the industry.