Now that recreational marijuana is legal in Canada, people are wondering how lucrative or future-safe it is to invest in the cannabis industry. Is it even legal to invest?
After all the hype built around legalization in the multi-billion-dollar industry, the “green rush” is proving to be volatile.
But as is the case with all industry booms.
While we are aware the legalization process has been anything but smooth, it's important for those interested in investing to be aware that regulations will continually play a significant role in stock market success.
And while the industry is highly volatile, it has been proven to be financially lucrative - if you play your cards right.
The feasibility of your investment success is also area-specific which is often subject to radical changes.
Cannabis research and PhD Candidate at UBC, Rielle Capler, states the success of the legal cannabis industry should depend on the study of the decades-old illegal market to ensure a successful future.
Capler goes on to say, “Besides affordability, the legal market has to include much of the current cannabis industry as possible, specifically small/craft producers and locally run retailers - all the options that a consumer typically prefers.”
Dan Bortolotti, a licensed financial advisor offers a different perspective in a statement to CBC, urging caution and common sense when it comes to investing in this industry.
“I don’t believe investors should be picking individual stocks; they are likely to be better off by using well-diversified index funds.”
“And I believe focusing on a single sector like cannabis is even riskier: it’s really nothing more than speculation. It’s not a long-term strategy.”
Back in 2017, four of the largest Canadian cannabis stocks, Canopy Growth, Aphria Inc, MedReLeaf Corp and Canopy Growth had investment return rates in the triple digits.
However, given that the growth within the industry is anything but consistent, stocks dropped 30-50% across the board before it was able to rebound once again. Are you willing to take such a risk?
This roller-coaster ride is obviously not for the faint at heart and leaves even the most veteran investors paranoid.
Vice President of the Green Organic Dutchman, David Bernard, knows there is a huge adjustment period ahead.
“There is going to be a shortage of product, that’s for sure,” he states and then concludes, “It should catch up fairly fast by fall of 2019 - the projects that have started should be there, however, there is definitely a shortage of product.”
In the end, there is no stopping the hype.
Casual investors are advised against jumping into the exciting world of the cannabis market without doing the necessary research.
Many individuals who are investing in cannabis companies are only doing so as they believe the sector has huge potential for growth.
While these people are probably right, one thing to keep in mind is that the market is aware of this and those expectations are already baked into the stock prices.
Have you jumped in and invested in the cannabis market?
What led you to this decision?
Let us know in the comments below!