Having the top cannabis stocks in a retirement portfolio can help investors reach good asset growth, especially in the legal marijuana sector. Here are some things investors wishing to invest in this sector should know.
In this article:
- What the Cannabis Industry Is
- Benefits of Cannabis Stocks to Investors
- What Investors Should Know About Investing in Cannabis Stocks
- How to Determine Which Cannabis Stocks to Buy
- Tips on Investing in Cannabis Stocks
- Some Companies in the Cannabis Industry That Are Available for Investing
Top Cannabis Stocks: A Guide on What an Investor Should Look for in the Industry
What the Cannabis Industry Is
Cannabis, most commonly known as marijuana, is a plant that has many industrial, medicinal, and recreational uses. While most people immediately think of cannabis in the context of the recreational marijuana market, the industry actually has a further reach both in Wall Street and the economy.
What most investors call the “Cannabis Industry” actually refers to a sector not only of cannabis growers, but also:
- Marketing and retailing of ropes, clothing, health supplements, medicine, and food products made from cannabis
If you’re looking for great alternative investments for your retirement, you should check this growing sector. Hemp and marijuana companies may start as small-cap stocks but can grow to a billion dollars or more valuation.
Benefits of Cannabis Stocks to Investors
While the marijuana industry is still young, early investors have earned quite a pretty penny already. In fact, marijuana stocks are still in their maturing or growing phase, which is a good time to start investing.
Disclaimer: Please consider all companies and suggestions in this article as solely informational in nature. What works for others may not work well with your investment profile.
Here are some potential benefits cannabis stocks can bring to investors:
1. Broad Market Reach Through Vertically Integrated Business Operations
The legal cannabis industry offers a wide range of products. What the public knows are medical marijuana and recreational cannabis, but the industry offers far more.
For example, hemp, which is the plant material with significantly lower addictive chemicals, form part of:
- Food ingredients
- Soap and cosmetics
Marijuana stocks branch out to other profitable sectors like real estate, fashion, eco-friendly, food and beverage, utilities, cosmetics, and other industries as well.
2. Legalization Wave
Not all states have legalized the use of medical marijuana and recreational cannabis. However, there is increasing support for both sectors, which can lead to bigger demand for cannabis products.
As public support grows, politicians hasten to approve the legalization of medical cannabis and other hemp products. With some states still in the process of approving the legalization of cannabis and hemp products, existing companies can gobble up market share.
Well-capitalized cannabis stocks have enough leverage to take advantage of the legalization wave. Early investors can take advantage by investing prudently.
3. Availability of Cannabis Stocks
Lastly, it’s quite easy to buy cannabis stocks for a portfolio or even for IRAs, 401(k)s, and other retirement accounts.
Most small-cap stocks in the cannabis industry have already received SEC and FINRA approval for public offering.
Investors can simply ask their custodian to buy shares directly. Additionally, you can check out mutual funds and index funds that are already investing in the hemp sector.
What Investors Should Know About Investing in Cannabis Stocks
What should investors know about marijuana stocks? Investors should keep an eye on the volatility as well as the business operations of a company who has a stock offering on the market.
It’s not uncommon for the market cap of a company in the marijuana industry to see daily growth in the double digits. Of course, the market isn’t without risks, which means investors should always do their homework first before thinking about investing in marijuana stocks.
Always remember, the top cannabis stocks lists you find may not necessarily fit your retirement strategy and risk profile. Always protect your retirement nest egg and use efficient retirement strategies, like using a 401(k) properly.
How to Determine Which Cannabis Stocks to Buy
Investing in marijuana stocks may seem like a good idea. However, not all that glitters is gold, and prudent investors should do their homework first.
For a more personalized list of top cannabis stocks, you can consult with a financial adviser who can provide recommendations personalized for your risk tolerance and investment needs and preferences. We say consult, since ultimately only you can decide whether or not to invest.
To get a more in-depth understanding of a company, an investor can look at the SEC filing that shows important information investors need to know. Generally speaking, some features of cannabis stocks that make them ideal for buying and investing include:
- Strong financial health — A company with a lot of reserve cash, stable and growing sales, and good management skills.
- Experienced veterans on the board — Human resources play a critical role in the management of a company, and upper-level executives can lead the company to profitability.
- Expansionist plans and vertical integration — The top cannabis stocks lead the other marijuana companies through their search for more profitable avenues and diversifying their product line.
Tips on Investing in Cannabis Stocks
- Know how much you can afford to lose and use only that amount — This lowering of your investing budget doesn’t just minimize your risk but also lets you help sleep at night.
- Charter your timeline and risk profile — If you know your retirement horizons and goal, you can see the bigger picture and make good investing decisions.
- Pick a reliable broker and custodian — For reliability, we’re not only looking for trustworthiness but also reliable connection and speed of transactions, documentation of all trades, and ease of doing business.
- Partner with a good financial advisor — Whether for retirement goals or short-term buying and selling of stocks and mutual funds, talking with an expert can help you see crucial insights you might have otherwise ignored.
Some Companies in the Cannabis Industry That Are Available for Investing
For those looking for marijuana stocks to invest in, here are a few companies in the stock market that are recommended by Investopedia.
1. Canopy Growth Corp.
Canopy Growth Corp, with a market cap of $8.5 billion as of 9/25/19, currently reigns as the world’s biggest company based on market cap and value of shares.
The corporation made history by being the first licensed and traded cannabis producer in North America when the Toronto Stock Market allowed Canopy to become a publicly-traded company in 2014.
2. Aurora Cannabis
A growing company, Aurora Cannabis is the second biggest marijuana stock after Canopy, with a market capitalization of $4.8 Billion as of 9/25/19. Aurora has a big international market, with business operations located not just in Canada but also in Denmark and Latin America.
3. Cronos Group
Another candidate is Cronos Group, with a market cap of $3.2 billion as of 9/25/19. The Cronos Group has distribution channels on five continents and international production while remaining headquartered in Canada.
Retirees and investors may find investing in Cannabis stocks profitable while the wave of legalization is still ongoing. After all the states have legalized marijuana, cannabis, and hemp, the market may consolidate first and focus on operations.
Usually, investing early while a company is still growing can provide high returns, but not always. When it comes to investing, it’s ideal not to invest money you can’t afford to lose, and t0 always stick to your investment plan.
We hope this article has helped you understand more about investing in the cannabis industry.
What are your thoughts about investing in cannabis stocks? What other industries or sectors are you interested in? Let us know in the comments section below.
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