The marijuana stock market is new, but reports show that this market will only continue to grow as more states opt to legalize. While the future of legalization on the federal level is currently unknown, the stigma associated with cannabis stocks is starting to lift as more and more investors are learning about investment opportunities.
While investors may be tempted to believe the hype about marijuana stocks without doing research, it’s essential to understand a company’s business model and the path to success. To be successful with investing in marijuana stocks, there are a few common misconceptions to take into account.
Here are 3 common misconceptions about marijuana stocks.
1. All Marijuana Stocks Are Created Equally
Not all marijuana stocks are hot. In general, cannabis stocks have seen a rise in the past year, so they are providing ample opportunities to investors who wish to invest in a new market. However, not all marijuana stocks do perform well.
Along with this misconception, many people also assume that just because a marijuana stock is hot at the moment, it will stay that way. Just like any other stock, this simply isn’t true. For factors out of investors’ control, stocks can plummet due to things happening within the company. This is true of all stocks, so it’s always important to do your homework and learn about which stocks might be best suited for you. However, making smart choices may only take you so far as many factors can make stock values drop.
2. Acceptance is the primary driver of marijuana stock success
While it is true that the use of marijuana in both a medical and recreational capacity has increased and become more accepted in the United States, it is not the main driver behind success. Although it is one major driver, the major driver behind marijuana stock success is how each company has branded itself and grown their business. For example, a cannabis company may experience increased share price of stocks in part to marijuana becoming more accepted, but certain cannabis companies have taken studies to reach medical patients instead of relying on the growing popularity of marijuana.
3. Investing in any marijuana stock is risky
Many marijuana stocks are indeed risky, especially when it comes to penny stocks. However, these stocks aren’t available for trading on a public exchange and are bought and sold over the counter. Public exchanges have specific requirements that promote trust; they require that companies make audited financial information available to investors.
Many investors simply lack knowledge of the marijuana industry and view it as a risk because of the current low trading volumes for many marijuana stocks. All stocks may carry a certain amount of risk, so it’s always essential to have the knowledge of industries before making a choice to invest. One of the best ways to learn about the marijuana stock market is to read marijuana news sites that have valuable information about certain companies, both successful and unsuccessful. Reading about cannabis stocks and businesses can help you learn more about the industry and make the best investment choices.
