Looking to Invest in Marijuana? Here’s What You Need to Know About the Fastest-Growing Industry in the U.S.
You don’t have to be an avid cannabis user to be intrigued by the investment opportunities of the multibillion-dollar industry. In fact, you don’t need to use cannabis at all. Whichever side of the road you choose to reside, investing in the cannabis industry can still be daunting. However, considering the avenues of navigating marijuana from seed to shelf, business opportunities are all over the map.
Investors are recognizing the potential volatility of the cannabis industry and how the impact of that volatility could be very beneficial or very risky. The investment space for Mary Jane is broad. Because of that broadness, it’s important to have a clear understanding of the risks you are willing and not willing to take with your investments. Whether you choose a traditional route of stock investments or a more nontraditional path, here’s a peek at a few options you might want to consider.
1. There are a lot of marijuana stocks
Between the United States and Canada, there are over 80 marijuana stocks in which you could invest. But there is a catch. A lot of the cannabis stocks are over-the-counter exchanges. NASDAQ and New York Stock Exchange have a market capitalization and share price requirements that do not allow for smaller companies, such as many of the cannabis variety, to participate.
When it comes to marijuana stock being traded via NASDAQ, there are some heavy hitters being exchanged, many of which are leading the charge for pharmaceutical developments around pain management medication.
2. Not many cannabis stocks are on fire
In the grand scheme of the marijuana business, it could be argued that the industry still remains in its infancy. As of 2017, 29 U.S. states and the District of Columbia have given the thumbs up to the sale of medical marijuana, recreational marijuana, or both. To boot, a Gallup poll found 64% Americans are up for legalization.
By 2021, the marijuana industry in the United States is expected to be worth $25 billion. With such a boom, cannabis businesses are working hard to gain a piece of the pie — market share — and it is difficult to know which stocks will succeed or fizzle out. Simply stated, the risk is high, and the winners and losers of the marketplace have yet to be fully sussed out.
3. Consider investing in stocks that are not solely dependent on marijuana
If high risk isn’t your bag, it might be worth exploring the broader scope of the marijuana industry. For instance, AbbVie, Corbus Pharmaceuticals Holdings, and INSYS Therapeutics are all big pharmaceutical companies using the healing properties of cannabinoids to create pharmaceuticals. The medications assist in pain management, treat childhood epilepsy, and increase appetites. Your investments might safer when you consider these companies’ total market capitalization is not based on one plant. After all, the global pharmaceutical industry is worth over $1 trillion.
4. Big business is monopolizing the weed industry
Exploitation of the weed business is inevitable. The same way Walmart swooped into communities across the nation, putting Mom and Pop out of business, such will likely happen to many small marijuana business owners. Deep pockets come with the territory of marijuana production and sale. Big dog investors and business owners have been able to flood the recreational markets with their products, along with scooping up the allotment of licenses to sell. This sort of activity makes the market prone to lower margins and higher risks.
5. Tax code 280E leaves businesses taking big hits
The loopholes, laws, and regulations surrounding legal cannabis really blow for business owners. Any business partaking in the trafficking of illegal substances must file taxes under code 280E. In this tax code, business deductions are banned with the exception of the cost of goods sold. Ultimately, the code requires all ganja businesses to pay much higher taxes than those of standard business owners. The downfalls of the code leave many small business owners with a lot less money to reinvest back into the success of their companies.
6. The federal government still isn’t a big fan of marijuana
Despite over half of the voting U.S. population being open to legalization, the Drug Enforcement Administration still classifies marijuana as a Schedule 1 narcotic. For reference, that means Mary Jane is in the category with drugs, including heroin, LSD, and cocaine. Furthermore, Attorney General Jeff Sessions would love nothing more than to put the kibosh on the further legalization of cannabis. Another quagmire? The scheduling of marijuana prevents some medicinal breakthroughs from getting the seal of approval from the Food and Drug Administration.
7. Venture capitalism might be your ticket
Step away from the idea of investing in more mainstream marijuana stocks, and entertain the idea of venture capitalism. Marijuana startups are sweeping the industry. And all these startups? They receive funding from venture capitalists looking to put their money into a business they believe in. Take the one and only Snoop Dogg, for instance. He has invested in Eaze (the Uber of herb), smell-proof packaging company Funksac, and the online publication Merry Jane. The options are practically endless when it comes to investing in startups.
8. Conduct your own thorough research
At the end of the day, researching market trends and keeping up with the burgeoning multibillion-dollar marijuana industry is most important. Legislation progressing toward legalization (or preventing it) will determine how the industry will behave in the coming years. But the overall outlook for cannabis is very bright as more states move toward legalization.
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