Cannabis has been a hot topic for quite some time now. With more and more states legalizing the use of marijuana, both medically and recreationally, it’s no surprise that cannabis stocks have been on the rise. But what is the cannabis stock market?
The cannabis stock market is a collection of publicly-traded companies that are involved in some way with the cannabis industry. This can include growers, dispensaries, manufacturers, and even ancillary businesses.
The cannabis stock market has seen explosive growth in recent years, thanks in part to the increasing legalization of marijuana. In fact, the global legal cannabis market is expected to reach $146.4 billion by 2025. This shows that it could be a wise investment to get involved in the cannabis stock market. That said, let us dive deeper into what the cannabis market is all about. Read on.
Factors to consider before investing in the cannabis stock market
Many investors are eager to get involved in the cannabis stock market, but a few factors must be considered before making any investments. Here are a couple of things to keep in mind:
The legal status of cannabis
In the United States, marijuana is still considered a Schedule I drug. This means that it’s illegal at the federal level. However, there are now 33 states plus Washington D.C. that have legalized marijuana in some form. It’s important to keep updated on the changing laws surrounding cannabis, as they can impact the industry and your investments.
The volatility of cannabis stocks
Cannabis stocks are notoriously volatile. This means that they can see significant fluctuations in price, often without warning. This can be due to a variety of factors, such as changes in legislation or unexpected market events. If you’re considering investing in cannabis stocks, it’s important to be prepared for this volatility.
Understand the risks
Like any other investment, investing in the cannabis stock market comes with risks. It’s important to understand these risks before making any investment decisions. Some of the risks associated with investing in the cannabis stock market include:
- The legal status of cannabis- As mentioned above, marijuana is still illegal at the federal level in the United States. This can create uncertainty for investors and make it difficult to do business on a national scale.
- The volatility of cannabis stocks- Cannabis stocks can see significant fluctuations in price, which can be difficult for investors to stomach.
- Lack of regulation-The cannabis industry is still relatively new and lacks comprehensive regulation. This can create problems for investors, such as fraud or questionable business practices.
- Limited access to banking services- Because of the federal illegality of cannabis, many banks are hesitant to do business with companies in the industry. This can make it difficult for investors to access banking services.
Now that we’ve covered some of the risks associated with investing in the cannabis stock market, let’s take a look at the potential rewards.
The potential rewards of investing in the cannabis stock market
Despite the risks, there are also potential rewards for investing in the cannabis stock market. Here are a few of the potential benefits:
- The global legal cannabis market is expected to reach $146.4 billion by 2025. This rapid growth could lead to significant profits for investors.
- Cannabis stocks tend to be less correlated with the rest of the stock market. This means that they can provide a degree of diversification for your portfolio.
- The cannabis industry is still in its early stages, so there is much room for growth. This could lead to outsized returns for investors who get in on the ground floor.
How to get started in the cannabis stock market
If you’re interested in getting started in the cannabis stock market, there are a few things you need to do:
- Learn the terminologies. The cannabis industry has its own unique language. Before making any investment decisions, it’s important to understand the terminology used by industry insiders.
- Stay up to date on the news. The cannabis industry is constantly changing. New laws and regulations are constantly being enacted, so it’s important to stay up to date on the latest developments.
- Understand the risks. As with any investment, there are risks associated with investing in the cannabis stock market. It’s important to understand these risks before making any decisions.
Top Cannabis stocks for 2022
Some of the top cannabis stocks for 2022 include:
1. Organigram Holdings Inc.
2. Village Farms International Inc.
3. Cronos Group
4. Sundial Growers Inc.
5. Green Thumb Industries
6. Trulieve Cannabis
7. Innovative Industrial Properties
8. Scotts Miracle-Gro
9. GrowGeneration
10. Jazz Pharmaceuticals
Bottom Line
If you’re thinking about investing in the cannabis stock market, do your homework and understand the risks. Investors who get in this quickly rising industry could reap huge benefits if they’re ready to accept some risk. Don’t forget to keep an eye on the financial markets as a whole; while cannabis stocks have the potential to provide outsized returns, they can also be volatile.
