How to Invest in the Cannabis Industry, Starting With Just $100

  • The easiest way to invest in cannabis with $100 is an exchange-traded fund.
  • You can also start profitable cannabis ancillary businesses, like printing and designing labels.
  • Because cannabis isn’t legal in all 50 states, it’s still risky to invest.
  • Read more stories from Personal Finance Insider.

Enjoying your favorite plant on 4/20? You might be excited to know that anyone can start investing in cannabis, starting with just $100.

Many believe that it’s only a matter of time before the plant is legalized in all 50 US states. If that time comes, early investors may be poised to make massive returns on their investment.

However, it’s important to understand the risks and do your research before investing. Financial planner Jay Zigmont at Live, Learn, Plan LLC says, “The general rule is to only invest in things you understand. While you may understand the product, there are a lot of challenges in understanding the investing and banking challenges.” 

Zigmont adds that, currently, no major bank allows cannabis companies to bank with them, which makes business operations difficult for companies you might want to invest in. He says, “Until it’s federally legalized, you may want to consider investing elsewhere.”

Insider spoke with two experts in the cannabis industry who shared creative ways to invest in cannabis that are federally legalized. Here’s what they said.

1. Exchange-traded funds

Cannabis banking and research expert Jason Wilson at ETFMG tells Insider, “Currently, there are a handful of ETFs that provide exposure to the cannabis industry.” An ETF, or exchange-traded fund, is a bundle of securities that can be traded on the stock exchange. ETFs can be a more cost-efficient and low-risk option to begin investing in the stock market.

One of the longest-standing cannabis-focused ETFs is the ETFMG Alternative Harvest Fund, which trades under the ticker MJ on the New York Stock Exchange. Wilson adds, “MJ does not offer exposure to companies that grow, cultivate, and sell cannabis in the US.”

According to its website, MJ is an index that measures the performance of companies within the cannabis ecosystem, such as Canopy Growth (CGC) and Aurora Cannabis (ACB) that  both produce and sell cannabis in Canada. MJ is the cannabis industry’s equivalent of the S&P 500, which measures the performance of the top 500 companies trading in the whole market.

2. Cannabis stocks

There are also cannabis stocks listed on the stock exchange, like GrowGeneration Corp. (GRWG) and Hydrofarm Holdings Group Inc. (HYFM), which both sell equipment needed for individuals and companies to grow cannabis.

Cannabis business advisor Marlo Richardson at Business Bullish tells Insider, “Stocks are a hidden mess, and I would definitely recommend that people do a lot of research before making an investment into a cannabis stock.”

Richardson says she recommends ETFs over stocks, especially for beginners, because “it allows you to diversify within the cannabis stock in order to minimize your loss.”

3. Ancillary businesses

Wilson says that most people overlook ancillary businesses that don’t “directly touch” cannabis plants, but are necessary for cannabis growers to operate. Ancillary businesses can be financial advising, bookkeeping, or equipment suppliers that cannabis growers still need to operate.

Wilson says, “Ancillary companies are in a position to benefit from the overall growth of the cannabis industry regardless of legal status. Additionally, they can benefit from industry growth with less sensitivity to cannabis pricing and taxes, two items that affect the profitability of cannabis producers.”

Robinson adds that most people can start an ancillary business of their own with just $100, starting with offering printing, labeling, and merchandising services to cannabis growers. “Printing is huge in the cannabis industry right now because of packing and labeling. Cannabis-inspired clothing has also become a huge revenue stream,” she says.

Finally, she adds, “Many of these ancillary companies can be started online with the overhead cost of starting a website and purchasing minimal equipment to get started.”

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