In the next few years, the marijuana industry could be worth as much as $77 billion, which is more than the GDP of 9 US states. The industry employs hundreds of thousands of people and the numbers continue to rise.
These stats are promising for marijuana investors, but as with any other investment, there are risks. Before investing in cannabis you should know the industry trends, risks, and what to look for in a potential investment to increase the likelihood of a return.
Below are 7 important tips to consider for new marijuana investors.
Know Where You’re Investing
When you hear about cannabis investors buying cannabis stocks you might wonder where exactly their money is going. Is it to the growers? Or the distributors? Or does it go to the people baking the brownies?
Here is what you need to know – there are three types of marijuana companies you could invest in. The first is the growers. They are responsible for the marijuana plants from seed to plant.
The second is biotechnology companies that research and create prescription drugs from cannabis. And the last is companies associated with marijuana-related products and services (distribution, packaging, lighting etc.).
When considering and investment in marijuana you need to know where your money is going – growers, biotech, or products and services. Once you’ve decided which of these types of companies you want to invest in, you’re one step closer to making money.
If you’re thinking about investing directly in a marijuana company, you want your money with a company that is transparent about its business. You want access to financial statements detailing all expenses, revenue, and profits.
You should also have access to supply chain data. For example, how long does the extraction process take? And how long does it take to sell a specific product? These steps are all part of your investment projection and planning for the future.
If the company uses a particular lab to test products, you’ll want to look at that data as well. Labs are a big part of the safety and quality control process in the marijuana industry as well as other products like SARMS or peptides.
Interested in learning more about SARMS and peptide products – check it out.
Reliable data should be easy to view and analyze. If a business cannot readily supply you with the data you’re looking for it could be a warning sign that they aren’t the right company for your investment.
Research the Management Team
You can find out a lot of information about a company by researching their management team. Look for anything you can find about their previous work. If they have been involved in other successful, profitable ventures, you may be more confident in investing with them.
Also, look for their experience in the marijuana industry. If the top executives are all relatively new to the world of cannabis, it could be cause for concern. While none of these factors is make-it-or-break-it, it can help you decide where to invest your money for the greatest chance at success.
Compare With the Competition
When putting a substantial amount of money into an investment, you always want to research the competition. Now that the marijuana industry is booming in the United States there is more competition than ever.
Is the company you’re planning to invest in unique? Do they offer something that their competition doesn’t? Ask yourself these questions as you research potential investment opportunities.
You can learn a lot from company websites particularly through their mission statement or vision for the future of the company. You can usually find all the information you’re looking for on the company’s investors page.
Read the News
The legal landscape of marijuana changes all the time. As a potential investor, you want to remain up-to-date on current policies, legislation, and research studies. A major article or interview about the benefits of cannabis could change the value of your investment quickly.
Look for local, national, or even international news stories that could impact your decision on where to invest your money. This is especially important if a specific company is mentioned by name – and whether it’s positive or negative press.
Is the company you want to invest in profitable? You’ve looked at all the data, but this point is particularly important as a potential investor.
However, a company that is not yet profitable does not mean you shouldn’t invest with them. The marijuana industry is still growing, so there are plenty of companies just starting out that haven’t had the chance to show their potential yet.
You may be able to find out how quickly the company expects to turn a profit and what they will require to keep the business running until that point. If they have a sound business plan to reach profitability you might consider investing even before they reach the point of making money.
Understand the Risk
There is no such thing as a sure thing. And investing in marijuana is not a sure thing. The tips above are a great starting place because they help you learn about the industry and what to look for in potential investments. However, the decision to invest is entirely your own.
Research, data, and preparedness can increase the likelihood of a substantial return on your investment, but it’s never guaranteed. Keep this in mind when you decide where and how much money you plan to invest.
Calling All Marijuana Investors
You’ve decided to invest in marijuana. You’re joining a billion-dollar industry with the potential to grow exponentially in the next few years. If you follow the tips above you can be a part of the group of highly successful marijuana investors.
Do your research, ask tough questions, and demand the data. Making an educated investment is the best strategy when it comes to the cannabis industry.
Learn more about the marijuana industry on our blog!