Although Cannabis, or marijuana, and its derivatives is illegal in many countries as it is considered a drug, more and more governments have decided to legalize it. This has brought not only medical benefits, greater freedom to buy it or impacts on its traffickers, it has also generated a new industry.
Investing in Cannabis can be very profitable if you know how to do it, since the examples of companies that sell millions of dollars in weed are many. That is why we have prepared for you this guide to investing in Cannabis.
▶ Why invest in Cannabis?
- Regulations: More and more countries have made their regulations on marijuana more lax, this has made the market more and more accessible. This is a great reason, since you will not have to face cumbersome legal processes to invest in this sector.
- Medical Applications: The potential of Cannabis as a way to treat certain diseases and conditions is enormous. And it is that every day new medical applications are discovered for this plant, so the potential in the pharmaceutical industry is enormous, which ensures its value.
- Playful uses: As a form of training and recreation, Cannabis will gain much more popularity among users every day. That is why, like investing in Netflix, investing in marijuana can give you many benefits as more users start using it as a form of entertainment or recreation.
- Market potential: In addition, you should know that marijuana has great market potential because it can be used in a large number of forms and products. Today, in addition to the already known form of smoking, we find marijuana in oil, ointments, pills and even in food.
▶ Economic outlook for marijuana
If we look at the data, we can see how cannabis has become a very lucrative business after being legalized. In 2017, according to figures from various organizations, the marijuana industry exceeded 10 billion dollars in value.
In addition, it is estimated that by 2020, up to 47 billion dollars could be billed, as well as generating more than 340 thousand sources of employment. This is only in the United States market, as Europe is considering legalizing cannabis at its borders.
▶ Ways to invest
There are different mechanisms that we can take advantage of to invest in cannabis, since not everything is limited to planting your plant and processing it. Here we will tell you the ways available to invest in this plant without the need to sow it, cut it and come into contact with it.
Publicly traded cannabis companies
The first option available to invest in cannabis is through the stock market. To do this, you have to buy shares in a company that is listed on the stock market and that is dedicated to the production, sale or processing of this herb.
This option, while safe, is also difficult, as most of these companies are listed solely on the New York Stock Exchange or the Canadian Stock Exchange.. The brokers that offer access to these exchanges are usually expensive, especially for users in Latin America and Europe.
One of the downsides of investing in cannabis is that it can be somewhat volatile. That is why many experts recommend investing through an exchange-traded fund or ETF. Ideally, this is done through a listed fund that brings together companies dedicated to the cultivation, production, processing, distribution and sale of cannabis.
Currently we can find different exchange-traded funds which vary depending on the companies they bring together. The most common exchange traded funds are ETFMG Alternative Harvest (MJ), Emerging Marijuana Growers Index ETF and Horizons Marijuana Life Sciences ETF. The largest is ETFMG, as it has more than 1,100 billion assets.
On the other hand, you can make an investment on CFD's, which can be much easier, simpler and, above all, accessible. There are many options, as brokers often offer this mechanism to their investors.
The BITA Cannabis Stock Index is considered one of the best indexes, since it groups together 20 companies related to marijuana. We can also find the BITA Global Cannabis Giants USCANNA which covers 64 companies in the segment. Thus, we can find many more indices to invest on CFDs.
▶ Broker to invest
If you want to invest in marijuana, these are the best brokers.
- XTB: This broker offers you a CFD mounted on the BITA Global Cannabis Giants USCANNA index which groups 64 companies in the sectorBoth from the United States and Canada with a large capitalization and good value.
- Plus500: On the other hand, we have Plus500, an index which groups together 20 Canadian companies in the cannabis sector that are publicly traded. The main characteristic of this index is that 4 of the companies operate in the pharmaceutical sector, which gives it great support.
It is important to learn how to choose a broker, as this will influence the performance of your investments, as well as determine how simple the process can be. Although there are more options, the two brokers mentioned above are the most chosen option by both novice and expert investors.
▶ What's next for cannabis?
Undoubtedly, more and more countries approve the use of marijuana both medicinally and recreationally. That is why more and more companies will decide to enter this market, whether in production or sale and distribution.
In a short time we will see this sector really explode so the profits and the value of your investment will go to the sky. The road still has a long way to go, but what better way to get on it when it is just beginning than at the end, when it is already saturated.
Financial analyst and economist with a master's degree in finance.