The legalisation of marijuana has created a lucrative business sector in US states where the consumption has been legalised. 4 states in America have approved recreational marijuana laws, while 24 further states have approved medical marijuana laws. The legal marijuana market grew 17% in 2015 to $5.4 billion, according to ArcView Market Research, and is estimated to grow another 25% in 2016 to $6.7 billion.
Hence, not surprisingly there are many new Marijuana-related start-ups and some are even listed on the stock exchange. That means you can now legally invest in Marijuana by buying stocks in companies in the marijuana industry.
Should you invest in marijuana stocks?
While investing in marijuana might sound fun and also profitable given the current boom in the legal marijuana industry, it needs to be noted that marijuana stocks tend to be very risky investments.
Many of the listed marijuana stocks are small companies. They are traded over-the-counter, and function within an industry with a lot of regulatory and legal risk. Cannabis is still considered a class 1 controlled substance under Federal Law!
How to invest in Marijuana stocks?
Personally, I would be a bit hesitant to invest in marijuana stocks at this point in time. I consider them very risky given the current legal environment surrounding the commodity in the United States. Having said that, as it is generally the case in the investment sphere – the higher the risk, the higher the returns.
Therefore, if you want to invest in marijuana stocks you could purchase one of several ‘Marijuana Motifs’ through the online wealth management platform Motif Investing. That way you hold a diversified portfolio of marijuana-related stocks.
Alternatively, you could stock pick the marijuana stocks that you believe will outperform. If you decide to invest in specific marijuana stocks, make sure you conduct thorough research on the companies you choose to invest in. You can find a list of marijuana stocks here. But remember, most of them are small, illiquid stocks that carry a high level of risk. So tread carefully!