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Investing in Cannabis Stock - What You Need To Know

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November 26
3:53 PM 2018

Cannabis is now a legalized product in Canada, and investors are learning what kind of gains they can make from the stock market because of it. As a result of Canadian legalization, startups are popping up around Canada to capitalize on the change. US companies are finding an opportunity to expand their operations north of the border. With an abundance of options and uncertainty around the up and coming industry, here's what you need to know before investing your money into cannabis stock or ventures.

#1 Cannabis is Not the Dot-com Industry

The first comparison many are likely to make is with the Dot-com bubble. However, the emerging cannabis market is unlikely to look like the Dot-com industry that grew and burst from 1995 to 2000. Unlike the rise of the internet, the cannabis industry is highly regulated and won't have the same universal application. Regulation alone is a reason for investors to examine the cost and benefits of investing in the industry, but also one that should provide assurances compared to the early, unregulated world of the internet.

#2 Wait and See

Patience is key right now. Share prices may be inflated because of early promises for future growth in the industry. This can cost investors considerably if stock prices were to plummet. Companies that have simply expressed interest in the cannabis industry are seeing their stock prices increase. If these companies were to fail in delivering on their interest, investors could come up short after jumping the gun.

#3 Diversify Your Portfolio

Any seasoned investor will tell you that the best investment strategy is to diversify your portfolio. This means that rather than investing in just one or two companies in a single industry, it is a far better choice to invest in multiple companies from multiple industries. That way you can mitigate volatility in any given industry. If there is anything to be learned from investors who put all their funds into Bitcoin at its peak, it's that you can't put all your eggs in one basket.

Before investing in the cannabis industry, it is extremely important to get as much information as possible. Talking to a financial advisor is a great first step. Stay up-to-date on cannabis regulations if you plan on investing. And lastly, review a company's financial statements and annual reports to understand the health of their business and future growth potential.

#4 There Are Alternatives to Stocks

If you're looking for investment opportunities outside of the stock market, companies like Starbuds that can began in the U.S. are now expanding into Canada. Canadian legalization has opened up major opportunities for investment partnerships. Retailers like Starbuds.co have begun franchising in Canada, an alternative opportunity to investing in stocks. With their origins in Colorado and new growth opportunities arising in B.C., they're leading the new cannabis economy.

There is still plenty of uncertainty in the cannabis stock market, but one thing is certain: the cannabis industry is growing and there's money to be made. Take the right precautions before you invest your money and you can come out ahead. Legalization in Canada has created a major new international market with countless opportunities.

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