A quick background on cannabis or marijuana
We’ve been seeing a total switch when it comes to cannabis usage. Many places around the world, not just in the USA, are legalizing the usage of cannabis.
According to History, cannabis usage dated decades back as a medicinal option for some common illnesses.
“Marijuana, also known as cannabis or pot, has a long history of human use. Most ancient cultures didn’t grow the plant to get high, but as herbal medicine, likely starting in Asia around 500 BC.”
“The history of cannabis cultivation in America dates back to the early colonists, who grew hemp for textiles and ropes. Political and racial factors in the 20th century led to the criminalization of marijuana in the United States, though its legal status is changing in many places.”
Why is cannabis being legalized across the states?
As of today, more than 32 states have legalized the usage of marijuana in some forms or another. A number of states have also decriminalized the possession of small amounts of marijuana. The reason behind this legalization is to reap some money through taxes.
Could it be the best way to invest your money?
According to Forbes, states are making 15% on taxes on all recreational and medical cannabis products, and additional local taxes and fees. Currently, a number of states are making millions in profits.
Legalization of cannabis has opened a door to a massive, new source of revenue for state governments. It doesn’t look like this cannabis legalization chain will be broken anytime soon because more and more states are currently contemplating how much revenue is there to make from this market.
The state of Nevada has even gone further to ban employers from rejecting applicants who are tested positive for marijuana usage.
According to Gov. Steve Sisolak who signed the law on June 5, 2019, for Nevada, there are some exceptions to this law because certain roles may not be covered under this law.
For example, motor vehicle operators, and those that may adversely affect the safety of others. This law will be in effect as of 2020.
Additionally, the law does not apply to firefighters, EMTs, employees who operate a motor vehicle, as well as others that are determined by the employer to adversely affect the safety of others.
The law states that if an employer requires a new hire to take a drug screening test, then the new employee also has the right to submit to an additional screening test to rebut the results.
What does that really tell us?
Although marijuana used to be categorized as an illegal drug, given the fact that it can make a state’s government so much money, they are willing to legalize it and reap the profit on taxes.
Cannabis’ projected worth is in the billions, and there’s a lot of money to be made —or lost in this market when it comes to penny stock trading.
That also tells us that cannabis stocks are going to look very good in the future as many wealthy investors will be attracted by the profits potential.
Note that I say in the future, I have a very good reason for that. During these early stages most, if not all, of the cannabis stocks will be found over the counter (OTC).
However, you may be able to find a small number of cannabis stocks being traded as blue chips; for example, Canopy Growth Corp (CGC).
Wealthy investors don’t have time to trade penny stocks and most of them would not be attracted to penny stocks knowing that they are extremely risky.
Should you invest in cannabis stock, or is it the best way to invest right now?
Honestly, no one can tell you that cannabis stock is the best option to invest in. But there is definitely a good feeling about this specific market due to this ongoing legalization process.
If you’re into small-cap company stocks then this market is definitely yours. You’ve already been accustomed to all the strategies and technical analysis needed in order to trade in such a thinly traded market.
But if you have never traded penny stocks before, it’s definitely a no, no for you as you will be risking losing your money as fast as a blink of an eye.
For us penny stocks traders, we should be able to cash on some nice profits through this market. Buy when prices are looking good for you and sell after seeing some profits.
I would not advise you to hold onto any penny stock as the odds of having one explode and shoot for the moon is pretty slim. But you should never underestimate the pumps.
What you should look for when investing in cannabis stocks
According to Chris Milenkevich of Gotham Cannabis Associates who is also an attorney, the following points are very important to investors.
Licensing; “You need to make sure that the company has every license that it needs, from every jurisdiction that it needs, and that could be state, county and local.”
What he’s saying is that a company may have a license to operate in one state or jurisdiction but this particular license doesn’t cover anywhere else.
To be on the safe side it becomes important that you look into that because your brokerage firm may not accept them depending on their location and that of the license holder.
Staying in line; “ The best cannabis stocks to invest in will be aware of and compliant with all relevant regulations.”
I would suggest that you request some information about regulations from any cannabis company that you’re about to buy shares from.
Cash considerations; “Another result of the federal prohibition is that there are very, very few banks that are willing to work with the cannabis industry or credit card companies, because there’s a very real [risk] that they will be shut out of the federal banking system, if the federal government finds that they are … processing money for illegal operations.”
Your best bet would be to ensure that your state has decriminalized cannabis first before investing.
Furthermore, “A lot of cannabis companies are dealing entirely with cash. So, if you’re an investor, you need to think about how that is working, how is the cannabis company dealing with these, literally, bags of money.”
Community relationships; Finally, “If you don’t have a good relationship with local authorities, they’re going to be looking for reasons to shut you down,” he said. “And when there are 600 pages of regulations, it’s not that hard to find a reason, no matter how careful you are.”
Meaning that cannabis companies have to do everything in their power to function as required because it’s not that difficult to close them down.
Abide by the rules is a must and there’s no way around that.
How to invest your money in cannabis stocks
If you don’t already have an online broker, then it is the time to do so. But first, you’re going to do a little research as there are so many to pick from and each one has some up and downsides.
Some brokers may not allow cannabis stocks trading through their platform, thus it becomes very important that you look into that before you’re registered.
Another important aspect of online brokerages is how much you’re getting charged per transactions.
Fees are everywhere, Nowadays, even a regular bank account costs a monthly maintenance fee in many banks.
Although your brokerage may not charge a monthly fee you’ll definitely be charged with a transactions’ fee. No way around this one.
Every time you buy or sell your shares you’re getting charged, it may not be much but you don’t want to pick a brokerage that costs too much for you. Especially if your portfolio isn’t a large one.
As the legalization of cannabis is being done in many places, investors are seeing this as a great potential to cash in.
It’s reported that Colorada has made over a billion dollars in just a few years. There’s money to be made and many other states are looking to legalize cannabis.
Honestly, the potential is there to make a lot of money. However, regulations can be very strict and limit investors attraction.
If you’re even contemplating the idea of investing in this market do yourself the favor of researching and doing your due diligence first.