There is public support for marijuana. Many states worldwide have legalized its use for recreational or medicinal purposes. Marijuana stocks have enormous gains and investors say that they could multiply even more. For example, in the U.S., they project the marijuana market could reach 22 billion dollars by 2022. These are some of the reasons for wanting to invest in marijuana stocks and this is what you need to know to make an informed decision.
Delta-9 tetrahydrocannabinol and cannabidol are the two ingredients at the forefront of a battle over marijuana. The former is known for its effects of mind altering behavior and is the one that makes people psychoactive, while the latter possesses therapeutic benefits.
The spread of the legalization of marijuana has created a niche that investors and entrepreneurs look to tap into. There is the cultivating and growing or service provision to growers, distribution and retail marketing, and biotech development of cannabinoid based prescription drugs.
Many industries in the cannabis market have gone “public”, making shares available on stock markets to raise money for further growth and that is a major reason many people consider investing in marijuana stocks.
Here are the merits and demerits of this sort of investment.
- Increased demand and supply.
There is a high interest in marijuana from many people, youth to old WeedSmart . This is a good enough reason to consider the investment as there is market for it which in turn results into labor intensive measures to get the product. Investors therefore look to provide funds and look for areas where their money will bring back hefty returns. They may outsource services or provide resources to start a company from the ground up. The presence of a market is a good indication that money invested will return with profits.
The availability of jobs, especially for young people is not only beneficial to them, but the market and investors as well. From those who grow and cultivate the plant, to those working in processing plants, there are managerial positions, transporters, security personnel among other opportunities. If everyone is doing their work well, surely, one is not crazy to expect returns.
- Increased revenue.
For states where marijuana has been legalized, the returns are taxed as is any other business and the money can go into development of the state or country. This is of great importance in undertaking projects to better the lives of everyone. Also, investors get their returns, workers get their salaries, the nation improves economically and this is a positive effect.
- Projected growth may not materialize.
Marijuana remains illegal at the federal level and there can be a crackdown on marijuana related businesses which means that the expected returns may not be realized.
- The black market.
People are able to get all kinds of things on the dark web where identities are hidden, illegal products are sold and worst to the marijuana business, for cheaper prices which would make investments not have substantial returns. This, in tandem with the fact that federal anti-marijuana laws are not favorable to establish significant operations is a devastating blow to marijuana companies and investors.
- Excess capacity of the product.
Excessiveness of marijuana may lead to a failure to absorb all of the products, a typical case of high supply yet low demand. In such a case, some stocks could be in trouble and due to the competition, investors could be steered away by better prices.
- “Sin stocks”.
This is where the stocks of companies whose businesses center on a product, service or industry that some view as unethical or immoral do not generate returns that were projected because of personal ideals or principles. Entrepreneur Warren Buffett declined to buy or invest in a tobacco company because of the stigma associated with the effects of tobacco.
Ultimately, with all the advantages and disadvantages of either choosing to invest in cannabis stocks or not, some fundamentals remain true. One should have a business strategy, examine their financial status, check stocks’ valuations and focus on extensive international operations as opposed to domestic markets only.