Investing in pot stocks can be tricky. With so many variables going into what makes a good cannabis investment, there are some common mistakes worth avoiding. Because pot stocks are so new to the investment market, there are key rules to think about when you first decide to invest in marijuana stocks. Additionally, the market is subject to see an incredible amount of growth as we move further into 2020 and beyond which is also a factor to consider. Currently, there are around 600 pot stocks that are publicly traded.
The majority of these companies are traded on OTC markets, but a few are traded on large stock exchanges like the NASDAQ and the NYSE. Because there are so many different cannabis stocks to choose from, oftentimes investors will simply invest based on one factor rather than considering the company wholly. Even though we will go over some of the most important rules to consider, the main thing to remember is to always do thorough research into whatever company it may be.
Diversifying is an Important Step For Investing In Pot Stocks
When investors begin to invest in cannabis stocks, oftentimes they do not consider the concept of diversification. Diversifying is one of the most important steps for investing in any market, let alone cannabis. This allows an investor to not have too much exposure to one particular area of the industry. With pot stocks, there are many sectors to choose from that all offer different levels of volatility. These include MSO pot stocks, pure-play pot stocks, and a whole slew of ancillary companies.
Risk is a factor that comes up a lot in the marijuana industry which means that it may be present in any facet of the market. Because of this, more risk averse investors may want to stick to the various cannabis ETFs and mutual funds that exist. The short story here is to not put all of your eggs in one basket. If one diversifies, it makes it much easier to avoid the large rampant price swings that can occur in the industry.
Don’t Let Only the News Sway Your Decision
Often times when people invest in the marijuana industry, they do so off of what a friend told them, or a popular story they saw. But, this goes against the main principle discussed earlier in this article. Always do the proper research in a given pot stock to make sure the companies financials line up with the hype. All publicly-traded companies are required to put out financials and fillings for the public to see.
Resources online such as OTCmarkets.com or other financial websites can help to see all of the nitty-gritty details about a given company. Press releases are definitely a great way to see which companies are gaining attention, but it should never be the only source one goes off of to make an investment. With this, investors should always use a mixture of news releases and the data put out by the company to ensure a given cannabis business is operating as well as people say it is. With this in mind, it is difficult to go wrong.
The cannabis market can be quite tricky for those without experience. But, with the advice above and a thorough amount of research, investing in pot stocks can be much easier than anyone thought possible. With more potential on the way, the cannabis industry continues to look extremely exciting moving into the future.