The Future of Cannabis Stocks and How to Invest

With the ongoing craziness of the 2020s many Americans have become discouraged from investing, due to increasing losses in many sectors across the market.

Cannabis Stocks

It can be particularly nerve-wracking to put more of your hard-earned paycheck into an account that has seen enormous volatility throughout the last couple of years.

Nevertheless, investors with a long-term point of view could see this market uncertainty as an opportunity to buy up high potential stocks for a significant discount.

So, aside from high flying tech companies such as Amazon, Apple, and Telsa, what other high growth options exist?

One interesting option for investors is the cannabis industry.

Despite seeing significant share price declines this year, due to fiscal and legislative pressures, the US cannabis industry is expected to see legal sales topping 52 billion dollars in 2026 alone.

The sector as a whole is primed for growth, especially if federal legalization is brought forward during the current administration.

Trends

So, if cannabis stocks are so great why are their share prices dropping?

The primary reason for this downtrend lies in uncertainty surrounding the timing of federal legalizations on several accounts.

Most importantly when and how the industry will become legitimized by the federal government, and in the short-term when will banks be allowed to offer credit to current legal state run operations?

It is widely expected that either or both of these hurdles being eliminated could help cannabis stocks reach new heights.

According to Viridian Capital Advisors and others, the first chance for legislative change could come in late 2022 after the midterm elections.

Furthermore, they state that one of the biggest challenges for the industry is its inaccessibility for investors.

Many US cannabis stocks have to be traded as OTCs or over the counter equities, meaning it can be both harder to invest in them and also a riskier investment than NASDAQ graded stocks.

This is one of the biggest reasons US investors turned quickly to Canadian companies such as Tilray that were available to almost all mainstream investors. 

With all of these risks assumed, why would investors take the chance on the cannabis industry?

For one thing, almost all experts agree that legalization is a certainty in the future.

Well more than 50% of Americans believe that cannabis use should be legalized and its use is already legal in some form in 35 states.

Every year more states are expected to include recreational marijuana usage to their dockets, and eventually it’s expected that the federal government will do the same.

Once the cannabis industry is legalized and able to access investor and institutional capital, experts expect widespread opportunities and growth on both a domestic and international level.

For investors looking to take advantage of such phenomenal long-term expectations, 2022 may be the perfect year to invest.

With overall market downtrends and uncertainty, almost all sectors have dropped well below their 2021 valuations.

This widespread market pressure could allow investors to enter the cannabis industry for a significant discount, particularly if the industry makes legislative headway in late 2022. 

How to Invest in Cannabis Stocks

If you decide investing in the cannabis industry is the right option for you, what are the best and safest ways to go about it?

For the most part, buying individual US cannabis stocks can be tricky depending on your broker.

For investors that handle their own investing, make sure to check your broker for what options are available in the OTC market.

For other investors that prefer to invest in ETFs and/or through a traditional broker, there are a growing number of index funds and ETFs that widely cover and track the cannabis industry and could provide a way to invest without giving up the safety of diversification.

Furthermore, international cannabis stocks such as Tilray do trade on common exchanges such as the NASDAQ and are widely available to investors on almost every platform out there.

These stocks could provide a safe and proven entrance into the industry, without having to worry about the short-term risks surrounding US legalization. 

Overall, the cannabis industry has been an exciting sector to watch over the last few years and it’s expected to continue to see short-term volatility as the road to legalization continues.

For long-term investors looking to expand their portfolios at a potential discount, the marijuana business could offer significant upside.

Additionally, with increased accessibility to institutional capital, the cannabis sector could soar to new heights with a rush to acquire competitors and to expand with a large increase in funding.

Whether or not you decide to invest in the marijuana industry is up to you, but either way the sector is expected to continue to make headlines on its long and tumultuous road to both state and federal legalization across the United States.