Is it worth it to pay for expert advice when investing in cannabis?

Published Nov 27, 2020 12:00 p.m. ET
iStock / scyther5

So, you’re looking to dabble in the cannabis investors' green space. Cannabis stocks are budding today, and what was once looked upon as a shady corner of investing is now a hot commodity that is still in its early stages. Do you need help with choosing the correct path while you’re looking at where to put your money in pot stocks? The answer undoubtedly is yes.

Do your research and homework. Whether you choose to pay for assistance from cannabis investors who are walking the path already or if you decide to do the homework yourself is ultimately a personal choice. However, one needs to be aware that as with any investing, caution needs to be taken. There are several sectors for you to choose from when it comes to deciding where to put your money in the cannabis stock space.

Biotech and research companies are well worth looking into as an option for cannabis investors. Specialists in distribution and consumption is another valuable venue for cannabis investors to look into. It is poignant to remember that cannabis in the United States is still a Schedule I substance on the federal level. This alone adds to pot stocks riskiness, and some new cannabis investors will need to seek professional advice.

Some of the extra challenges that you may encounter on your cannabis investors journey can include:

  • Cannabis is a relatively new industry and as such, marijuana stocks are small, often falling into the penny stock. It is a risky business for cannabis investors, especially if they are a beginner in the industry. The younger the company, the higher the risk that the business may fail, and in turn, your pot stocks value will follow suit. The wide swing on price can be debilitating for the new pot stocks investor.

  • Pot stocks are considered to be speculative. Never invest more than you can handle to part with, just in case the investment turns sour, and you lose your money.

  • A substantial amount of cannabis companies that are trading in the United States are from their neighbor country Canada. Americans enlisting in cannabis stocks abroad need to be conscious of some of the additional risks that may be present. Limitations are most noted on access to financial data, company reports, and research, and these are mainly present in the U.S. It also has to be acknowledged that if an investment is fraudulent, there is no legal recourse.

  • Banking issues. When the word cannabis is in the air, there is always an added risk for investors.

Final words

The decision to get advice when the time comes and you find that cannabis stocks are of interest to you is ultimately up to the individual. Never should your portfolio be made up of only cannabis stocks. This rule applies to any single stock market because the key to long-term investing success is diversification. Doing your homework will guide you but take care and make sure that no more than ten percent of your portfolio is dedicated to individual stocks like pot stocks.

Remember, if you choose to go on this green investing road solo, then you will need a brokerage account to purchase your cannabis stocks.

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