Investors are always looking for the next hot topic to invest in. When a new trend hits the market people are always keen to find out more before they spend any money.
One of the most recent hot investment trends is Cannabis stocks. This is due to an increasing amount of countries that have legalised cannabis, either for personal or medicinal use. This has led to a business growth boom.
Events last year caused the market to grow, this was when California and Canada both legalised the use of cannabis. California legalised it for recreational use in January 2018. Canada then followed in October 2018.
For the first time in the country’s history, Canada legalised cannabis use for recreational purposes. Previously it had only been legal for medical use. This change of the law in Canada has led to the opening of dispensaries, large scale farms and marijuana companies.
Major companies such as Tilray, Canopy Growth and Aphria -(plus others), have now launched on the stock market. Online brokers have recently started offering cannabis stocks and CFDs for users to trade.
So if you want to invest in cannabis, but you’re not sure how, then keep on reading. We will be looking at the industry in general plus providing you with vital info that every trader should know. Most importantly we will explore ways you can get involved with trading in this new ‘green’ trend.
Why You Should Invest
You may be wondering why cannabis stocks are such a big topic, and the main reason why is because they are expected to boom in value. It is like when the focus on Bitcoin and other cryptocurrencies captured the worlds interest in 2017. People realised there was a new product to invest in and got excited.
It’s even more exciting when there a new stock is tipped to do well and grow a lot. The recent cannabis legalization in countries for medical or personal use has also attracted a lot of interest in the news and from investors.
The other thing is that industry is already worth a lot of money.
Forbes has predicted that by 2027 ‘spending on legal cannabis worldwide is expected to hit $57 billion‘.
Last year in the U.S. Alone, the legal marijuana industry was worth an amazing $10.4 billion dollars. From these figures it’s clear to see that there’s a lot of money involved in the industry which is continuing to grow.
With many industry businesses now trading on the stock market, it seems to be a good time to get involved and invest. Now that brokers are offering investors the chance to buy and trade cannabis stocks online, it’s even easier for people to get involved in this new sector. Keep reading to learn how to invest in cannabis as well to know which brokers are offering related stocks.
Is it Legal to Trade Cannabis?
It’s probably best that we answer this question first as it’s one of the most common queries that people have. This is because it’s assumed that like other illegal drugs, cannabis has emerged from the black market to somehow appear on online trading sites.
The important thing to remember though is yes, it is legal to trade cannabis.
This is because in some countries, cannabis is legal for medical or personal use. Therefore legalization remains a growing global trend. So in countries where it is legal in some form, businesses are created to support the industry. This could include medical or farming companies.
Some of these companies have become so large that they’ve started trading on official stock exchanges. This means that people can invest and trade in the company stocks.
Of course, it’s important to point out that it all depends on the official laws of the country where the stock company is registered. If it’s legal there, it is legal for you to trade cannabis stocks.
A few regulated brokers are now offering traders the chance to invest in cannabis stocks and CFD’s, which they also wouldn’t offer it was illegal. So if the broker is regulated and if offering stocks, you can be sure that it’s legal to invest and trade. With cannabis stocks tipped at being as big as cryptocurrency, it’s likely that more brokers will offer the stocks in the near future.
Basic Information About Cannabis
Mary Jane, pot, grass, hemp, marijuana, weed…the list could go on. But all are common terms for cannabis. Humans have used the plant for many years either as a medicine or for religious purposes. Rastafarians for instance believe that the marijuana is sacred. They commonly use it in religious ceremonies.
Marijuana vs Hemp
Various ‘strains’ of plants have been bred from the cannabis plant family. These get classified as either hemp or marijuana. Hemp is the term used to class types of cannabis that has a very low THC content of 0.3% or less. The low level of THC means that it’s not intoxicating.
Hemp can be grown as a crop to produce rope, food or clothing. Marijuana is the name used to classify types of cannabis that have more than 0.3% THC in them.
So although hemp and marijuana both come from the cannabis plant, the THC levels are different. Both however make CBD, (cannabidiol). It’s also known to have health benefits for treating anxiety and types of epilepsy. A wide range of medical products with CBD oil can be made, either as creams or edibles. Many businesses are involved in the supply chain. It’s a big business.
That’s why for medical reasons, cannabis has been legalised in over 30 countries. There is also increasing discussion whether to legalise it for recreational use too. One thing for sure is that there is a growing industry behind it.
How to Invest in Cannabis Stocks
When it comes to investing in cannabis stocks, there are some important things you should know about the industry. Firstly, it’s good to know that there are 3 main types of cannabis businesses:
- Cannabis Farmers/Producers– these will be large-scale farms or businesses that grow and harvest the plants. The plants are normally grown indoor buildings.
- Medical Companies– these businesses will focus on producing medicine and prescription drugs, usually with CBD extracts.
- Business Providers– these are external businesses that provide important items to the cannabis sector. This includes packaging & distribution of farming products.
Each of these 3 business types can be listed on the stock market. It’s important to know which are the companies specialises in. This will help you understand the market better. Two well-known companies on the stock market for instance are Tilray and Canopy Growth. Both firms are different cannabis businesses. Tilray for is a medical company whilst Canopy Growth is a producer.
Most of the largest cannabis stocks are located in Canada, mainly because Canada is the leading economic nation to legalise both medical and recreational use. There are also a few major USA companies also available as stocks that are worth looking at too.
Like any stock, it’s important to know the various types of companies and where they are based. This will help you understand the market before investing. Just because it’s cannabis, it doesn’t mean it should be treated differently to any other stock investment. This analysis will help you understand how to invest in cannabis.
Brokers Offering Cannabis Trading
Currently only a few online brokers are offering cannabis stocks and CFDs for investment. However, we want to go through some regulated brokers that have started already. Let’s see what products they are offering:
1 – Plus 500
With Plus500 you can trade on the cannabis commodities through CFDs. Related companies such as Aphria, Canopy Growth and Tilray can all be traded as stocks. Plus500 App and web version also list some of the most popular shares with their CFD trading platform under ‘cannabis shares’ here.
They also provide CFDs on a ‘cannabis index’ of the most traded stocks on the general market. This allows you to invest and trade on the business topic as a whole, rather than selecting specific stocks.
*80.6% of retail CFD accounts lose money
2 – IQ Option
IQ Option allows investors to trade on 6 cannabis stocks such as Cronos Group, Aurora and Canopy Growth for example. As well as the stocks the broker also has one cannabis ETF asset available.
*Your capital is at risk
3 – eToro
eToro is has created a CopyPortfolio for investors called CannabisCare. This investment strategy provides access to important North American cannabis companies in the industry.
This portfolio is a good long-term investment option if you don’t have enough time to day trade and want to let the experts manage the portfolio.
*Your capital is at risk
Hopefully after this article you feel more confident knowing about the industry and how to invest in cannabis. It will be interesting to see what happens in the market. But with so much growth and more possible legislation to come, it’s likely that cannabis will continue to be the next hot topic in trading.