If you’re someone who’s passionate about emerging markets, you may have looked into how to invest in the legal weed market. The legal cannabis market is already massive, and it’s projected to get even bigger over the next few years. This is opening up some exciting new investment opportunities. But how, exactly, do you invest in legal weed? Here’s an overview on how to invest in the legal weed market. If you’re willing to take the risk, a smart investment now could pay huge dividends in the near future.
Introduction To The Legal Cannabis Market
Currently, in the U.S., recreational weed is legal in Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Washington, and Washington, D.C. Earlier this month, Vermont became the ninth state to legalize recreational weed. Additionally, there are 29 states where medicinal cannabis is legal.
Despite the growing numbers of states with some form of legal weed, it remains illegal at the federal level. This tension can make investing in legal weed a little trickier and more complicated than investing in other markets.
But going through the additional effort to figure out the legal weed market could lead to some extremely profitable investments. In fact, Arcview Market Research recently reported that the legal weed market in North America grew 33 percent last year. The market finished 2017 at just below $10 billion. Experts predict that the legal cannabis market in North America will be worth $24.5 billion by 2021.
Looking beyond North America, experts predict that the global cannabis market could exceed $31 billion in the next four years.
With this sort of explosive growth on the immediate horizon, now could be a great time to invest. To get the most out of your investment, you need to know how to invest in the legal weed market the right way.
Two Options For Investing
There are two main ways to effectively invest in the legal weed market. First, you can invest in Canadian companies that trade on established exchanges such as the Toronto Stock Exchange (TSE).
A few companies to keep an eye on are:
- Canopy Growth Corp.
- Aphria Inc.
- Aurora Cannabis
Last year, Canopy Growth, Aurora Cannabis, and Aphria reached a combined valuation of $14.5 billion. Similarly, Aurora Cannabis recently announced a new deal with the Italian government. Under the deal, the Canadian cannabis company will supply medical marijuana to Italy via Aurora’s Germany-based subsidiary Pedanios.
Your other main option for investing in legal weed is to invest in U.S.-based companies. This option will be a little bit different. That’s mostly because most cannabis companies in the U.S. are traded as “over-the-counter” (OTC) stocks.
OTC stocks are not traded on formal exchanges like the New York Stock Exchange (NYSE). Instead, they’re traded largely on dealer networks. Typically, the companies selling OTC stocks are smaller than ones on the NYSE or the NASDAQ. Similarly, these companies do not have to meet the same reporting requirements and regulations as larger companies trading on centralized exchanges.
To purchase OTC stocks, you’ll need to open an account with a reliable brokerage firm. Most mainstream firms should have access to OTC cannabis stocks. To track which ones are doing the best, keep an eye on the “United States Marijuana Index.”
Final Hit: How To Invest In The Legal Weed Market
Doing your homework is crucial for any investment. But it’s especially important when you’re investing in the legal weed market.
Not surprisingly, the cannabis market is extremely volatile. This is especially true when you’re looking at OTC stocks in the U.S. Much of the market’s volatility comes from the ambiguous and always-changing legal status of cannabis.
If legalization is finalized this summer in Canada, it could lead to a much more stable—and hopefully more profitable—legal market in that country.
If you study the market well and keep an eye out for the best-performing companies, you may be able to use this volatility to your advantage. Either way, investing in the legal weed market is definitely not for investors afraid to take risks. But for those willing to dive in, the added risk of investing in the legal weed market could yield massive returns.