5 Best Tips to Consider Before Investing in Marijuana

Laws are finally changing regarding marijuana. Many states are becoming more lax when it comes to cannabis, and this is opening up a new industry.

This industry has not seen the light of day in ages, and it is creating a lot of opportunities for interested parties. Now, we know this is a young industry that has a lot of hurdles to get through, but it is obvious that it may become a lucrative one given enough time. The following five tips will help interested individuals invest in marijuana with eyes wide open.

1. Pay Attention to the Filings

As a newbie, there is a lot that has to be paid attention to especially with an industry like the cannabis industry. It is important that an investor check the stock filings for any company that is being considered.

These filings can usually be found on the Securities Exchange Commission, often referred to as the SEC. Sometimes, this information is also available on some exchange sites. The reason you are doing this is because many cannabis companies are launching in bad faith.

The businesses are going to look legitimate, but if the filings are examined, then it will be clear that the company does not have more than a name and an idea. A legitimate business is going to show proof, like a real business plan and projected revenue among other details. Pass on any investment opportunity that does not have a clear filling.

2. Watch Out for the Publicity Trick

The business is quite new, so there are all sorts of things investors have to pay attention to in order to invest wisely and reduce risk. One scheme or trick that potential investors have to look out of is the pump and dump scheme.

It seems that some traders attempt to take advantage of people who are still new to the game by creating artificial excitement. These traders buy a lot of stock, and then look for online publications that could promote the marijuana stock.

Since the trader holds a lot of stock, the company may look healthy, but that is not always the case. These traders are waiting for newbies to get excited about finding a gem through some of these publications, but the intention is to drop the stocks quickly after enough people have invested, and that could represent a huge loss for those just starting off.

See if the website is simply providing the company with a promotional boost. This promotion should be mentioned in the post. Any boost could be artificial, and this should not be trusted. Check to see if a number of online articles continue to praise the company that is being considered. News that good is usually too good to be true, so steer clear.

3. Look for Genuine and Obvious Management

Investors who have narrowed down choices will now have to take the next step before deciding on which company to invest. That next step is making sure proper management has been set in place.

Potential investors need to call the company’s headquarters or offices to speak to management. The conversation should focus on what the cannabis company is attempting to do and how it is achieving these goals.

A company that is not responding to calls quickly or seems to always have a full mailbox should be avoided.

The reason you are avoiding these types of companies is because the likelihood of the marijuana business not staying in business is higher, since the company hasn’t invested in management.

This, and the other steps are time consuming, but if you want to learn how to invest in marijuana companies properly, a little patience is needed.

4. Understand All Investing Opportunities

When it comes to the marijuana industry, it is important to keep in mind that there are sub-categories. Someone who is thinking of getting involved in this kind of investing should think about what area he or she is really interested in.

Most people usually focus on the actually consumer products subcategory, but there are others to consider, like the pharmaceutical and research sector. Here is where new strands are created and where investors will find companies focused on helping people with certain medical issues.

People who are interested in supporting farmers could focus on companies that are trying to grow or produce cannabis to be sold to distributors.

Another kind of business linked to cannabis is real estate. These companies are involved a little more indirectly. They might rent out space for storefronts, or they might sell land to growers.

Hopefully, these tips make it easier to invest in this industry. It should be pointed out that since the laws regarding this industry are still pretty young, it is important that potential investors pay attention to local and national legislation. One change to the law, and the industry can suffer huge losses. Keeping an ear to the ground regarding laws is just smart, so don’t overlook it.

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