The global cannabis industry is experiencing unprecedented change in 2018. Widespread changes to legislation surrounding medical marijuana have encouraged thriving markets in dozens of American states, select nations in Europe, and parts of Latin America.¹ With Canada set to legalise and regulate the sale of recreational marijuana, never has the phrase “times are a-changin” been more relevant.
Now Is The Perfect Time To Invest In The Cannabis Industry
With incredible innovation and market growth comes a fantastic financial opportunity. Virtually all sectors of the cannabis market are experiencing expansion, amendments to legislation, or renewed focus. As such, striking while the iron is hot and capitalising on the rapidly growing market is a great way to secure a sustainable investment.
5 Ways To Invest In Cannabis
If, however, you are not sure where to start, or more importantly, where to invest, we have compiled five ways to make your money work for you.
1. Buy Stocks/Utilise An ETF
The first and most obvious choice. The stock market is awash with financial opportunity, none more so than in the cannabis industry. That being said, that doesn’t mean every new startup is an untapped gold mine. With global regulations changing daily, share prices react accordingly, proving to be relatively volatile.
Therefore, expect stocks to be a long-term investment and don’t forget to diversify. Putting all your weed in one basket increases risk, especially if new companies fall by the wayside. A secondary option is to choose an ETF, or exchange-traded fund. The fund is designed to secure large stockholders with the aim of providing a steady return, rather than the “buy low sell high” tactic of a professionally managed mutual fund. One bonus with ETFs is they typically incur meagre fees in exchange for services.
2. Purchase A Commercial Cannabis Operation
What better way to start investing in cannabis than by going straight to the source? Medical markets are exploding, and so too is demand for adequately grown, quality marijuana. There is some speculation about the valuation of said grow companies, primarily in the Canadian market. Apply the same rules to buying commercial growing businesses as you would stocks; diversification is critical.
Producing medical marijuana on a commercial scale is one thing, but providing a spectrum of products is another. Consumer need for cannabis oils and CBD-rich strains is growing at an equal or accelerated pace to the pharmaceutical need for the standard plant. Pick a company that has plans for expansion and can accommodate future marijuana alternatives.
3. Invest In A Dispensary
Using the US as an example, in states that have legalised medical and/or recreational marijuana, the product is only available legally through licensed dispensaries. Currently, federal law prohibits the movement of marijuana between states, so picking a dispensary company that has multiple geographically unique stores will increase the odds of financial success.
If your chosen business doesn’t currently offer multiple locations, review their business plan or previous year’s Form 10-K² to evaluate future expansion. The same process can be applied to European markets, although at present your options may be fewer in number.
4. Secure A Cannabinoid-Based Drugmaker
Cannabidiol or CBD is one of the primary chemical compounds in cannabis that is both widely legal and extremely beneficial for holistic treatments. Recently, the FDA³ approved the cannabinoid for the treatment of specific cases of extreme epilepsy in children. Health food consumers have also flocked to the potent compound, with anecdotal accounts of its therapeutic benefits growing by the day. The desire for CBD-infused products is all but guaranteed to rise; there are no risks of toxicity, and it doesn’t give you the high associated with marijuana.
Pharmaceutical companies that produce CBD oils or creams are worth reviewing. However, the increased popularity has led to varying degrees of quality. Ensure that they can prove the source of their CBD, the production method used, and if their product has been independently evaluated.
5. Marketing And Packaging Firms Are Worth Reviewing
All those seeds, oils, face creams, health foods, and even cannabis-infused drinks need both packaging and promotional material. There is still a large amount of scepticism surrounding cannabis, and while it may be unjust, an incredible amount of informative marketing is needed for marijuana to thrive.
Again, just like all of the previous investment options listed, research is vital. Regulatory bodies like Health Canada⁴ have very specific limitations on what can and can’t go on marijuana packaging. Similar rules will apply in both the US and Europe. Successful companies will need to stay up-to-date with government regulations and possess a detailed understanding of market demographics.
Further Options Exist
We have listed five methods; however, the options for cannabis investment continue. Grow-farm real estate agencies, companies that produce analytics tools, and even cryptocurrencies aimed at providing payment options for marijuana and its related goods all offer a means of assisting the development of the cannabis industry—while making money in the process.
Whatever you choose, take your time, evaluate what you are prepared to lose (remember, no investment is 100% secure), and set a limit. With careful research and a clear investment plan, there has never been a better time to capitalise on cannabis!
1. Prohibition Partners. The LATAM Cannabis Report. » See Source
2. United States Securities and Exchange Commission. Form 10-K. » See Source
3. U.S Food & Drug Administration. FDA approves first drug comprised of an active ingredient derived from marijuana to treat rare, severe forms of epilepsy. » See Source
4. Government of Canada. Proposed Approach to the Regulation of Cannabis: Summary of Comments Received During the Public Consultation. » See Source