The cannabis industry is booming! With legalization spreading nationwide and the COVID-19 pandemic leaving other industries in shambles, investing in cannabis has been one of the few ways to make money over the last decade. How can you invest? What are some strategies for making sure your investment pays off? And how much can you realistically expect to earn from this type of investment? Read on to learn more about how to start investing in cannabis.
Roll up your risk with ETFs
ETFs are an easy way to diversify your investments. But make sure you review the fees, as some may erode your profits over time and needs careful consideration of what sector’s in which you want to invest.
Some ETFs for cannabis stocks are: Stockspot’s Global Cannabis Innovation Index Fund, Evolve Funds Group’s CannaGro Select Class Shares, and Horizons Marijuana Life Sciences (HMLSF) Index ETF. These will give a general mix of companies throughout the legal pot market as well as investments from outside markets into marijuana-related industries.
Play it Cool with Private Equity Firms
Private equity is when investors buy stock in privately held companies at an early stage and then bring them public after they’ve seen some success or grown enough to be profitable on their own. This type of investment allows startup founders like yourself
Buy Organic Only
It’s important to remember that stock prices can fluctuate quickly due to new circumstances and the choices of influential market players.
Too often investors blindly stray into the cannabis market, and there’s a chance you could be buying from one if you buy just because of a recently acquired license. A good way to avoid this is to look for small-to-midsize local operators who are looking for organic growth.
They have positive unit economics, delivering industry-leading asset utilization and licensing at a deliberate pace. And while it can be difficult to access capital, there is high demand for their stock.
Cannabis investors face the same risks as any other investor, but they also have unique challenges associated with managing their investment portfolio of equity holdings related to this space. It’s important for these types of investors to monitor market trends carefully before making trades or investing further.
Even though you might know how to invest well when it comes to traditional goods and services, many people opt out because they feel like there’s not enough information available about pot-related businesses or don’t want the stigma attached to being an ‘investor’ in marijuana.
Break Down the Research
Investors should be well informed before investing. It is important to read up on a company’s fundamentals and history if you are responsible for their future success.
The legal cannabis industry has taken root in our economy and throughout our daily lives. Two out of three Americans are now in favor of legalization. And even those who don’t consume have probably run into a cannabis headline in their mainstream media.
While most industries were completely upended during the COVID-19 pandemic, cannabis proved to be essential, adaptable, and deeply rooted in our culture anf economy. Reported cannabis sales increased 46% in 2020 alone, and as legalization continues nationwide more and more opportunities to invest are sprouting up.
Big or Smaller Players?
When it comes to investing in the success of this quickly growing industry speak with smaller players that operate locally as well as larger multinational corporations you can find on business indexes like Fortune 500 Companies or Nas
The cannabis stocks that are not good will not be capable of selling their products at a higher price than what it costs to bring these products to the market. These companies are not profitable which could indicate the management either doesn’t know how to run a business or is incapable of remaining solvent.
However, some CEOs will be willing to accept losses in the short-term if there is a reasonable expectation of long-term profits. They like to think they are expanding more rapidly and getting new licenses by accepting these short-term losses. The reality might be different when you look at how much of their assets were misused.
There are CEOs that will justify losses as the necessary cost of rapid expansion and new license acquisition. However, a deep dive into these companies’ asset utilization often tells a different story.
Focused on acquiring licenses that have high barriers to entry (areas with low competition), they capitalize on their long-term licensing agreements in areas where cannabis is already legalized but there are few players – or none at all. These acquisitions yield stable cash flows from decades worth of existing contracts…
Don’t Invest in Cannabis Stocks More Than You Can Afford to Lose
The cannabis industry is a highly volatile one, so it’s important that you don’t invest more than you can afford and be very well-informed before investing. It’s not uncommon for investors to get into the sector with high hopes only to lose their entire investment overnight. The best way to avoid this scenario is through diversification – which means separating your investments between stocks, bonds, cryptocurrencies, real estate etc., rather than putting all of your eggs in one basket…
Invest with Good Tree Capital
Investing in debt for the cannabis industry is a far less explored investment opportunity than investing in cannabis stocks. This is because most debt investors are prohibited from lending to an industry that has not been federally legalized and regulated, but Good Tree Capital LLC can offer you the opportunity to invest your funds into these opportunities as a private lender with lower-risk potential for higher returns…
Good Tree Capital is solving this problem and delivering investors exceptional returns in the process.
Turns out a bunch of really small businesses found themselves in a tricky situation after COVID-19. Without capital and resources, the idea of getting licensed was an impossible notion because they just couldn’t get everything together and still compete.