Investing in cannabis is a lucrative business in today’s times, considering so many countries around the world have legalized their use for medicinal and recreational purposes. Cannabis oil and oil products are a hit in the consumer market for their avowed purpose of providing relief from anxiety and chronic pain as well as anxiety-related ailments like insomnia. Hence, cannabis business looks like a total competitive landscape.
Investing in cannabis for beginners
It is important to note that there are three kinds of marijuana companies:
- Marijuana growers- companies that cultivate marijuana
- Cannabis-focused biotech- companies that develop prescription drugs based on ingredients found in cannabis.
- Providers of ancillary products and services- companies that provide key products and services to the marijuana industry, such as, consulting, distribution, packaging and lighting services.
Investing in cannabis requires potential investors examine carefully under which category they want to invest. To invest in cannabis oil stocks one should lay focus on the company’s management team and its top executive’s track record in this industry. Further, research the company’s strategy regarding its growth and expansion to see if the company is profitable. A thorough examination should reveal to the investor how a company intends to differentiate itself from its rivals. Also, business in cannabis oil products is a recent phenomenon so one needs to stay updated about the latest information in the market. For investing in cannabis in particular, it is critical to understand the geographic markets a company is targeting. Each market has its own set of opportunities and risks involved with it. While investing in cannabis stocks, an investor needs to be mindful of the fact that although cannabis is a fast-paced industry, not every company can be a winner. There can be major licensing issues, as well as issues of emergence of a parallel black market for companies due to high rate of taxes on licensed cannabis companies and solutions may not happen overnight. Hence, when involved in a business like cannabis, one need to have a lot of patience and growth rates might fluctuate highly for many companies. Sure, cannabis oil and other products have been in the market for a long time, but its legalization in most countries will take a long time to come. Even in a highly developed country like Canada, one can witness sufficient supply issues associated with cannabis products. Such supply issues have been caused by a mammoth licensing application backlog and compliant packaging shortages. Even in the US, high tax rates of marijuana have fueled the black market.
Hence, unless one follows the cannabis industry’s every move it can be tough to spot out the companies that will rise to the top. One can consider approaching the various cannabis-focused funds that offer investors a basket-style approach to investing. However, with every fund, one must carefully check the fees associated with it, as high fees can eat into potential gains. With a lot of patience and perseverance, one can surely aspire to make it big in the cannabis industry.