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The Complete Guide to Investing in Cannabis Stock

The Complete Guide to Investing in Cannabis Stock
Written by
Alex Carlson
Published on
November 23, 2020
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The legality of the use of marijuana or cannabis depends on the definition of the below in each country:

  1. Cultivation.
  2. Distribution.

iii. Possession.Cannabis has been used only for recreational and medicinal purposes. They are covered under various treaties of the UNO. The treaties are:

  1. Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.
  2. Convention on Psychotropic Substances.

iii. Single Convention on Narcotic Drugs.Countries That Have Legalized CannabisMany nations have either decriminalized the recreational use of the drug. In some countries like the USA, this is a state policy. In the US, two territories and eleven states, along with the District of Columbia, have legalized the use of cannabis for recreation. Other countries are:

  1. The Netherlands.
  2. South Africa.

iii. Uruguay.

  1. Canada.
  2. Georgia.
  3. Certain areas of Australia.

Cannabis as a Product to MerchandiseCannabis retailing has come of age and innovative display merchandising is materializing. The sellers of the drug have experienced numerous marketing methods and did several analyses. This led to strategizing avenues for better profits. Now cannabis is at par with any consumer good. Naturally, cannabis companies entered the financial markets and listed their businesses in stock exchanges, creating a lucrative opportunity for people to invest.Dilemma of InvestorsCompanies dealing with cannabis are showing great prospects in many world markets. This hitherto unknown product has left many prospective investors in a dilemma. Many are not very much aware of which cannabis stocks to invest in. Some are not sure whether it is right according to law to buy and sell a marijuana stock- a relatively new industry.How to Invest in Cannabis StocksThere is no difference between investing in the stocks of a listed company and a cannabis company. Please understand that buying and selling the stocks of a cannabis company is not the same as dealing with its product.Anybody can invest in cannabis stocks by following the below 5 steps:

  1. Open a securities account with a trusted stockbroker. iFOREX is a reliable and trustworthy brokerage house.
  2. Make sure that your intermediary has a choice for investment like mutual funds and ETFs.

iii. Make sure that the trading platform's commission rates are low or nil.

  1. The program should have ample education tools.
  2. The customer service should be fast and efficient.

When to Invest?If you opened your brokerage account on a good platform, start your research using the tools available with them. You need to spend time to assess the risk factors and narrow down choices for investing.Now you are ready to buy.Effect of COVID19The pandemic affected cannabis stock prices and companies in three ways:

  1. Additional funding in production and marketing to ensure safety.
  2. Disruption in the supply chain as a direct result of regulatory measures by countries.

iii. Curb in tourism-related industries and activities and uncertainty over its resumption.Cannabis Stocks That Topped the ChartsA 30% Return on Investments will make seasoned investors happy. Can you believe that a few cannabis stocks returned more than that in the month of October alone? They include:

  1. Terr Ascend: The stock prices rose more than 32%. Their production capacity got increased by over 500%.
  2. Canopy Growth: The stock prices of this Canadian company soared more than 32%.

iii. Curaleaf Holdings: Their share prices ascended a little below 32%. The parameter of market cap credits Curaleaf to be the largest American Cannabis company.Highest Total Return for Twelve MonthsCannabis stocks that continued to climb steadily on a 12 months’ average are:

  1. Grow generation Corp: They showed an amazing Trailing Total of 362.4%.
  2. Trulieve Cannabis Corp.: With a price of CA$31.21 and an average Trailing Total of 135% Trulieve is second.

iii. Planet 13 Holdings Inc.: Their price is CA$4.47 and market cap is CA$530.1. PLTH maintained a TTR of 125.8%.Tips for Selecting the Best Cannabis StocksNow that you did your homework and are ready to spend money, make sure to invest small in the beginning. Follow the below parameters to select the best company:

  1. Market Cap of the Company: The stocks of a company are categorized into three segments depending upon their market capitalization amounts. They are large, mid, and small. Most cannabis stocks come under small or micro-cap segments. There are no listed cannabis companies with a cap higher than $10 billion to qualify them as large caps.
  2. NASDAQ or NYSE stocks: For your initial trades, avoid Over the Counter stocks and go for only NYSE and NASDAQ stocks.

iii. Opinion of experts: Take the advice of reliable cannabis stock analysts to select your buy.You will be able to reap great benefits from meticulous research. Understand the market potential and look for companies that have adopted the best strategies to gain advantages.Image credit

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