The pot stock boom took investors on a wild ride in 2018. As Canada legalized marijuana and US states voted on it, investors bet on marijuana.
The result was a growing pot bubble on the stock market. It wasn’t all growth, as stocks rose and fell.
Entering into 2019, much of the volatility and uncertainty seems resolved. Although growth predictions are less optimistic, they’ve become much more realistic. This will also give the stocks a chance to prove they can provide steady, stable growth for investors.
Even with a good outlook, some marijuana stocks are going to perform better than others. Which ones are the best marijuana stocks to invest in?
In this guide, we’ll go over how you can make sure you’re picking the real winners.
Consider Different Methods of Investing
The first step to investing in marijuana stocks is deciding how you want to invest in stocks. There are a few different ways to buy stocks, including:
- Through a brokerage, including discount and online brokerages
- Through an exchange-traded fund (ETF)
- On the over-the-counter stock market
- Using a self-directed trading platform
For most people, the right answer is partnering with a brokerage. A broker may make weed stock recommendations for you. They’ll also handle the ins and outs of buying and selling.
You can also look into a self-direct platform, which lets you buy and sell stock on your own. This option avoids high fees some brokers charge. You do need a good knowledge of the stock market to be successful, though.
Over-the-counter markets are less regulated than major stock exchanges like the NASDAQ. They tend to be less transparent, which makes it harder to know the exact value of the stock you’re buying or selling.
An ETF is another good option. ETFs are pooled investment funds that draw from many smaller investors. They’re like mutual funds, but they provide the same flexibility of individual stocks.
Read up on Companies to Find the Best Marijuana Stocks
Once you’ve decided how you want to invest, you’ll want to do some research into different cannabis stocks. As we said at the start, not all stocks are going to perform the same way.
You’ll want to keep an eye on a few different aspects of a company. What makes a stock a winner? You can look for a few of these traits:
- The company has been recording steady growth
- The company has plans for expansion
- The company has posted profits
You’ll want to keep a mix of companies with a proven track record and some up-and-coming players. Established companies provide stability. Smaller, newer companies may represent opportunities for exponential growth.
Read Expert Predictions
One way to find out which pot stocks are a safe bet is to read expert predictions. This is a good way for you to tap into someone else’s knowledge and experience. This can be especially helpful if you’re new to stock market investing.
Look for recommendations from many experts and compare the stocks they pick. If three or four people agree that one company represents a good opportunity, it’s probably a safe bet. Companies that are only recommended by one person may be more of a gamble.
If you work with a broker or financial advisor, you can also ask for their insights.
Right now, most lists include big Canadian companies like Tilray and Aurora.
Diversify with Different Kinds of Companies
One thing people often forget is just how diverse the marijuana industry is. You have growers and dispensaries, but there are also packagers and distributors.
When you look at stocks to buy, don’t forget about these other companies. They play a key role in the market, and as the industry grows, their fortunes are also likely to expand.
You can consider the following types of companies:
- Pharmaceuticals
- Financing
- eCommerce
- Food and Beverages
You can even look beyond the stock market itself. Companies in the marijuana industry also need places to put warehouses and farms. Commercial and agricultural real estate is another way to diversify your portfolio.
Look out for Changes in the Investing Environment
You’ll want to keep an eye on the pot stock price both before and after you invest.
You should also keep an eye on changes in the investment environment. Changes like initial public offerings and new laws affect the price of weed stocks.
This was why 2018 was such a wild year. Five Canadian companies listed on the NASDAQ, which caused stocks to soar. News of Canadian legalization drove investor speculation.
When legalization arrived in Canada, stocks dropped. The US midterms drove more stock speculation.
The 2018 Farm Bill also changed the outlook. It legalized hemp and hemp-derived CBD products.
Larger economic trends can also affect stock prices. For example, news about trade deals can make investors nervous, which may lead to lower prices.
The best way to keep up with these sorts of changes is to pay attention to the news. You may want to subscribe to a newsletter or an investment advice site. Many newspapers have both business and investing information as well.
The Market Outlook
Currently, the market outlook for marijuana stocks is quite optimistic. Many companies are expected to record substantial growth in 2019. The growth of legal sales is expected to continue expanding until at least 2022.
Some people predict the market won’t produce lasting growth, but for the moment, weed stocks are a solid bet.
Start Investing in Pot Stocks Today
The growth of the marijuana industry in the last few years has been nothing short of astounding. As the trend toward legalization continues, the industry looks to keep growing.
If you want to get started with pot stocks, you’re not alone. Using our tips, you can pick the best marijuana stocks for your portfolio.
Are you looking for more advice on how to manage your finances and grow your money? We’ve got plenty of tips for you to check out.