When you buy an individual stock share, you are buying a small share of the said company and it income; when the company does well, your investments grows.
As the cannabis industry keeps rising and some companies getting to project great price engagements, there has been a lot of excitement, curiosity, and interest in the cannabis stocks investment.
While there is promise of great returns in these cannabis stocks, it is important to exercise caution and take into consideration a few things before diving into it, as with any other up and coming business industry. You want to invest in stock that is more assured to make profit in the new future as it continues to grow.
Here is a list of things to look for when considering investing in cannabis stocks;
- Given that the cannabis industry is still relatively new, start with a small investment. This factor (newness) means that the market may fluctuate and prices change every now and then as the industry gains ground. A small investment will be easier to monitor. Give it time to mature, and if it does well, you can consider adding more stocks.
- Diversify; Pick companies that perform different functions within the industry umbrella- biotech companies, agriculture technologies, ancillary service providers, producers and/or distributors and alike. This will give you a higher chance that one of the companies will strike profit even if the others do not.
- As with any other business, make sure to choose a company that has a strong and integral managerial team behind the business. One that does not keep shifting from one team to the other as this which is usually more of an expense for the shareholders, and the instability can greatly affect the company and cause losses.
- Having a company with too many shareholders tends to create a great amount of dilution within the company. This in turn results in poor capital structure, as much more volume of shares put up for the share price to go higher.
- Check to ensure that the management team has also taken the step of investing in their cannabis stock shares with their own money. This should be a big cause of alarm if it is not the case, as it shows they have no confidence in their own company enough to plug into it themselves.
- If you are looking to invest long term, it would be advisable to consider an exchange-traded funds (ETF) where most of the stock is with cannabis related companies. This is an investment fund that holds assets such as stocks and operates with a simultaneous mechanism designed to keep it trading close to its net asset value.
Given the growing popularity of the industry, it is easy to fall into the hand of fraudsters. You there need to be careful and on the lookout for fraud symptoms such as overpromises on high returns and uncalled-for offers. Remember, investment is not about the now, but about the future.
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