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The Marijuana Industry Is Booming. Here’s What You Should Know Before You Invest In It

The Marijuana Industry Is Booming. Here’s What You Should Know Before You Invest In It


Few people would have considered the marijuana sector a good investment only ten years ago. But, it went from being illegal in all 50 states to be legal in more than half of them in less than a decade. As of April 2021, 35 states and the District of Columbia have legalized marijuana for medicinal purposes, with 16 of them allowing adults to consume it recreationally. As more individuals support the notion of legalizing marijuana across the United States, that number may continue to go up.

The Overview Of Marijuana Industry

We must keep in mind that the cannabis industry is still in its infancy. However, according to Morgan Paxhia, managing director of Poseidon Investment Management, the start of the investable marijuana industry in the United States came into visibility in January 2014. 

Even though recreational marijuana became legal in 2012, companies did not begin selling it until two years later. However, in the last seven years, 18 states and the District of Columbia have legalized cannabis for non-medical use, allowing the business to expand quickly. 

Indeed, many believe 2020 to be a milestone year for the business, as legal sales of marijuana in the United States surpassed $17.5 billion. It was a sharp increase of 46% from the previous year.

Top Marijuana Stocks In 2021

As previously said, cannabis businesses can be classified as auxiliary product and service providers, producers and sellers, or marijuana biotech firms. However, in 2021, there will be hundreds of marijuana stocks to pick from. 

Some firms have been operating for a long time on this list, and some of the younger cannabis companies are also doing good who have joined the game late. So, the top marijuana stocks are;

  • Anheuser-Busch (BUD).
  • Cronos Groups (CRON).
  • Scotts Miracle-Gro (SMG).
  • Altria (MO)
  • Canopy Growth Corporation (CGC).
  • Curaleaf Holdings (CURLF).
  • Tilray (TLRY).
  • Green Thumb Industries (GTBIF).

The advantage of investing in these businesses is that they have a track record beyond their involvement in the cannabis market. In addition, as marijuana is only one of their many lines of business, they may be less vulnerable to the industry’s ups and downs. 

When it comes to investing, keep in mind that it is always wise to diversify your investment portfolio, which means investing in not keeping all your eggs in the same basket.

How To Invest In Marijuana Stocks?

It is critical to conduct rigorous research before investing in the marijuana industry. First, examine the company’s financial performance since it became public. Its performance must also be compared to those of its competitors. 

Examining the income reports submitted with the Securities and Exchange Commission is another technique to assess the company’s financial position.

Marijuana equities, like any other niche or alternative investment, should be kept to a tiny part of your entire portfolio. According to financial experts, alternative assets, such as cannabis products should account for no more than 5% of your investment portfolio. 

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The rest should be invested in index funds with a wide range of holdings. Investing in cannabis companies is similar to investing in any other business. These equities are traded on stock exchanges in the United States and maybe bought and sold through any significant brokerage company.

The Risks Of Investing In Marijuana Stocks

According to Paxhia,  2021 is a prime example, with various cannabis stocks rising considerably until February 2021 before plummeting by 50-60% by October 2021. With the cannabis market in the United States still in its infancy, this volatility is predictable. 

Investors who haven’t seen high volatility in their portfolios previously or whose portfolios are too strongly skewed toward cannabis may be surprised. So, make sure you have all of your other financial assets set straight before you invest a small portion in the marijuana industry. Then, invest only that much money you can afford to lose if you want to avoid the risks. 

Closing Thoughts

We think the marijuana industry is booming, but it still needs to be researched in-depth to understand better. In addition, the industry is currently undergoing extreme volatility, so some of you may want to wait a bit before investing in it. Still, if you’re going to invest now, we think you should invest in the stocks that we have suggested earlier.

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