Self-Directed IRA Expert: Horizon Trust BlogDecember 17, 2021by horizontrust5 Benefits to Investing in Cannabis

The cannabis industry is currently on the rise, and despite its controversial status, it has been the focus of investors’ attention for the past few years.

The most asked questions related to this topic are how to invest in cannabis and the prospects for this sector? It is time to answer all of them in detail! 

What Are the Benefits of Investing in Cannabis?

You may find many merits to taking your first step into the world of cannabis investing. The most important ones to consider when making decisions are the broad sector to invest in, the legalization trend accompanying market growth, and the development of technology for cannabis production. 

Huge Market Segment for Investment 

Investing in marijuana entails purchasing stocks and shares in industry giants involved in all production and sales phases. These could be enterprises that grow marijuana, biotech firms dedicated to studying its useful properties, or small-scale enterprises that deal with logistics and transportation.

The largest companies to buy shares in the sector are the following: 

  • Canopy Growth Corporation is the Canadian and global market leader in cannabis-based production with a market capitalization of $5.79 billion. The cannabis stocks are mostly traded on Nasdaq Global Market and the Toronto Stock Exchange. 
  • Green Thumb Industries is based in Illinois, USA, and holds a huge market share in the production of cannabis products. Priced at $21.59 per share, this manufacturer provides an affordable and reliable way to invest your finances.
  • Aurora Cannabis is a cannabis producer founded in 2006 with four medical subsidiaries, namely CanniMed, MedReleaf, WMMC, and Aurora, working with academic research institutions and medical facilities. Today, this enterprise has a market capitalization of $1.396 billion and is trending toward earnings and stock growth.
  • Like shares of any other market-leading cannabis company, Cronos Group stock can be purchased on the NASDAQ Stock Exchange. It owns PEACE NATURALS, a global wellness platform, COVE and Spinach, and Lord Jones and PEACE +, which proves a far-reaching impact on the company’s rapid development.
  • Aphria Inc., with a market cap of $4.87 billion, produces and sells medical cannabis in Canada and abroad. It offers pharmaceutical-quality medical cannabis and adult-use cannabis under the Solei, RIFF, Good Supply, and Broken Coast brands.

Purchase of Shares of Medical and Pharmaceutical Companies 

Many pharmaceutical companies consider incorporating marijuana into their sales strategy so that anyone can freely get access to cannabis stocks to buy.

The most prominent manufacturers in this area are Zynerba Pharmaceuticals Inc., Cara Therapeutics, Tetra Bio Pharma Inc., GW Pharmaceuticals, and Corbus Pharmaceuticals. The main goal of such companies is to focus not only on the development of medicines made from marijuana but also to pay great attention to their solid reputation, which makes their marijuana stock quotes rise. 

Investing in Cryptocurrency for Cannabis 

The cryptocurrency industry shares common characteristics with cannabis in terms of legal status, as both have no clear set of laws and rules governing all financial processes and transactions. Thus, the idea of creating a separate cryptocurrency for the purchase/sale of legal marijuana emerged to simplify the transaction system itself. The most common and promising cryptocurrency options presented for the marijuana market are CannabisCoin, DopeCoin, Tokes (TKS), HempCoin, and PotCoin. 

The Powerful Trend Toward Cannabis Legalization 

The relaxation of laws on marijuana consumption has created a market worth tens of billions of dollars and many investment opportunities. Moreover, the cannabis market is gradually coming out of prohibition and getting regulated by the legislative bodies. For instance, Germany, England, France, Italy, Argentina, Australia, and some other EU and African countries lifted the ban for medical purposes. 

Still, Canada and the United States currently represent the largest centers for cannabis sales. Canada is the first G7 country to allow recreational marijuana. In addition, the U.S. continues to lean toward legalizing cannabis for medical and recreational purposes. 

All in all, when particular U.S. states and entire countries legalize cannabis, new companies appear out of nowhere, which results in a massive boost in market growth.

Strong Cannabis Market Performance

According to projections, sales of legal marijuana will be steadily increasing each successive year. This will empower novice entrepreneurs to enter the market and establish companies producing and selling the substance. 

As the industry is booming nowadays, it is estimated that by 2026, legal recreational cannabis sales in the United States will reach approximately $42 billion

Accordingly, with significant market growth, the number of consumers in the US is increasing and is thought to reach the 50 million mark by 2025

What Are the Risks of Investing in Cannabis? 

Despite the fact that large cannabis producers have already proven their success, investing in their assets still carries some risks.

Controversial Status of Cannabis

The sale of marijuana is still considered illegal at the federal level, which is why the U.S. has not lifted restrictions on monetary transactions for the purchase and sale of cannabis. Although political support for marijuana legalization has increased, there is no clear decision on its status, which naturally affects commerce.

Non-Availability of Global Stock Exchanges

Unlike the industry giants, small cannabis-producing companies are still trading stocks bypassing the financial exchanges. In doing so, they do not provide an opportunity for investors to evaluate the profitability of shares and examine the financial background, making such investments a risky endeavor.

Volatile Environment for Start-Ups

As an unsteady and booming agricultural industry, the marijuana market is volatile for start-ups due to fluctuating percentages of supply and demand. Therefore, in the early stages of a company’s development, producers must be clearly aware of the amount of production to avoid capacity reductions, which in turn can exacerbate stock declines and investor outflows.

Investing in Cannabis Could Be Your Next Move

Despite all the controversy and contradictions surrounding marijuana, the potential for developing monetary resources in this sector is enormous. Thanks to the significant advantages that this sphere offers, your investments will bring a high income and stability within the right niche.

Learn more about profitable ways to invest with the help of Horizon Trust!

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