One frequently asked question within the Girl$ on The Money community is about Cannabis (Marijuana, weed) stock, and my thoughts around it.
First, I want to share that I have personally never owned any cannabis stock nor do I plan to buy any in the near future. Buying such investment goes against my core strategies as an investor which includes but is not limited to: (1) Only investing in profitable businesses (2) Investing in things I understand and (3) Investing in companies that have a solid foundation and track record of success.
These strategies are very personal. It is what has worked for me for the past (almost) 11 years since I started investing in stocks.
In the case of Cannabis stock, here are the specific reasons why I’ve stayed away:
Still illegal at the federal level.
Marijuana remains illegal at the federal level – Although is legal in Canada and in many states within the United States; the bottom line is that cannabis is still illegal federally in the United States. Investing in something that is not fully legal doesn’t really sit well with me.
Virtually every single stock in the cannabis industry is not yet profitable. They might have sales, but there are $0 in profits.
Most are “Penny Stocks”.
Most Cannabis-related stocks are penny stocks. Penny stocks are those that trade for a few dollars and/or often times pennies or cents on the dollar. This is another type of investment that I stay away from and consider it the bottom of the barrel of the stock’s world. One of the main reasons being that penny stocks are NOT regulated.
And thus, for example, if the company behind those stocks decides to close down shop and leave the country, there is not much an investor can really do. Also, many penny stocks are famous for “pump and dump” scams and many other types of scams. Investing in unregulated businesses seems like a pure gamble in my personal opinion. Your hard-earned money deserves better.
If I were to ever invest in the cannabis industry…
I think I would do it “indirectly” by buying shares in an already well-established, profitable, business that perhaps decides to diversify its product offering by investing in cannabis.
I feel that going that route (in present) times would just make it a lot safer considering those businesses are already making money and if the weed investment turns out to be a flop, it’ll be mostly irrelevant. And thus, my investment won’t suffer much.
I will “never say never”. However, as of right now (and for as long as I have been investing), my thoughts on cannabis stocks remain the same – it feels more like gambling than anything else and I rather put my money in businesses that have a solid foundation. I like to sleep well at night.
QUESTION FOR YOU: What are your thoughts on cannabis stock? Have you invested in any? If so, what has been your experience?
Side Note: Please refrain from promoting cannabis investments in the comments. It will get deleted. I see a lot of weed stock promotions on Instagram and always fear for the people that fall into those traps.
Cheers to Health & Wealth,
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