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When is the Right Time to Invest in Cannabis Stocks?

The cannabis stocks have off late created a lot of buzz in the stock market, for all the good reasons of course. The industry is expected to reach a whopping $21.6 billion by 2021, according to ArcView Market Research. Despite its illegal nature in the eyes of the Federal Government, it is successful in inviting a lot of market attention. Investors are optimistic about the future of the industry, and hence, a lot of new investors want to try their hands on this business. The legalization of cannabis in Canada has just added more to this optimistic outlook. While the cannabis industry is still in its infant stages, one can get on the ride to benefit out of its potential boom and busts.

However, is it the correct time to invest in these stocks or shall we wait for the best time? To be honest, there is no right time to invest as such. Furthermore, before deciding whether to go ahead with the investment or not, one must rely on valid company documents and proper market study. Taking the right decision with the right sources available is extremely important. To help you out with this decision, let’s analyze the pros and cons of investing in cannabis stocks.

 

Advantages

  • Owing to federal regulations, banks may not easily provide capital to the cannabis ventures. This is an opportunity for the stock market to take the lead and make the most money out of it.
  • As more and more countries legalize cannabis, the effective losses in the home country are compensated by investing overseas.
  • Cannabis could be safely considered a recession-proof commodity, given its inelastic demand.
  • Apart from having economic benefits, cannabis also has various medicinal values which help in creating numerous revenue streams.

 

Disadvantages

  • As the cannabis stocks are traded in OTC exchanges, so it could be difficult to obtain sufficient information in order to make a wise investment decision.
  • Although cannabis is illegal federally, the government still taxes you on the revenues generated which are as high as 70 percent (compared to current 21 percent corporation tax).
  • Without proper regulation, these stocks may also be targeted by fraudsters who lure the potential investors with false and misleading statements.
  • As the cannabis market is thoroughly fragmented, each country has their own set of regulations to be followed. This makes trading difficult for the investors.
  • As banks don’t get involved in this business, transactions are settled mainly in cash, making it vulnerable to frauds.

No investment in this world is considered risk-free. After all, the risk is the driving force behind making more money by investing little money. However, deciding in which stock to invest in and when a significant role plays in the future flow of income. One must take into account the various potential risks and weigh them with the potential risk rewards while deciding their portfolio. Only then, can we essentially reap the benefits of a right booming market, as in the case of cannabis.