As readers of Need to Know Basis are already aware, we don’t make specific stock recommendations.
However, we have been getting a lot of questions these days about investing in marijuana.
Maybe you've been thinking, "It's high time to look into diversifying into the marijuana sector" but don't know who to ask.
We know, it's not like it's a super common thing to go ask a financial advisor, "Hey, we heard investing in pot may be a big deal right now. Should it be in my portfolio?".
This new weed-investing era can be a little hazy and most people are not sure how to navigate it. Don't worry, you have a Financial Friend in Michael and he'll help you weed out the bad information floating around. (We promise, there's plenty more puns where those came from!)
Recently there have been a few big names in the industry making headlines.
If you are not aware of these high flyers and low crashers, you can take a look at Investors Business Daily’s latest list.
What you need to know first is that this is not a recommendation list, just an article to give you an idea of what is in the news.
We also need you to know our job is to help you know what you need to know not to recommend specific actions.
Do your own pot-related research and hire appropriate advisors to help with any specific recommendations.
Lastly, you need to know that investing in marijuana is a trendy, hot sector right now and has been for a few years but, given the risks, investing in weed is considered a high-risk alternative investment class.
Why should you care about investing in pot?
Well, you should care about the fact that pot is a hot investment and political topic. The perfect storm, right?
When we hear words like "hot" and "stock" in the same sentence, we in the finance world, see red flags everywhere.
Just ask the Securities and Exchange Commission (SEC). They write lengthy articles on this topic and form special groups to protect investors against potential risks. The SEC even has a whole web page simply dedicated to help you sort through the pot-investing craze.
Since weed is considered a high-risk alternative investment many professionals and regulators believe, given current available information, it is entirely possible and even likely investors will lose all of their investment and potentially more. We say more because if you are involved in fraud or criminal activity, whether inadvertently or intentionally, you will lose more than you bargained for.
You could say, your investment and freedoms could "go up in smoke"!
The fundamentals are pretty compelling for Pot. According to this Motley Fool article, spending on cannabis reached $9.5 billion in 2017, using data from ArcView Market Research and BDS Analytic the total is projected to increase to $32 billion by 2022, a compound annual growth rate of 27.5%. These are crazy numbers given the product is still currently shifting from an illegal regulatory environment to a legal one in many places across the globe.
However, with any shift, timing can make or break the investment...