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How To Buy Weed Stocks in 6 Steps: Marijuana Investing Guide for Beginners



January 15, 2018

Marijuana stocks are quickly becoming a popular investment across the country as more and more states legalize its medical and recreational usage. However, investing in cannabis stocks is not as straightforward as many people hope, and there are plenty of questions to be asked along the way.

Investing in marijuana stocks is risky, but can have high payouts.

Before You Start

Before you begin investing in weed stocks, you should make sure you have a clear background on what you’re investing in and how that money will be held and used.

But, before you start, you might be thinking one of the most common questions: is it legal to invest in Marijuana stocks? The answer depends on the company you choose to invest with. At the federal level, Marijuana is still illegal. However, for the past few years, the federal government has “turned a blind eye” to companies who follow state regulations. So, in short, be sure whoever you invest in follows state regulations.

However, if you would like a 100% safety guarantee, as naturally suggested, you could instead invest in Marijuana indirectly by investing in companies that manufacture equipment and related items that are used in the production of Marijuana. This technique is considered completely safe and legal by industry leaders.

Companies that “don’t touch the plant” and deal indirectly with the growth of the Marijuana industry include The Capsule Consulting Group and Canna Flavors, which both make food products that are used in baked goods that use Marijuana. GreenBroz, on the other hand, manufacturers trimmers that are completely legal to own and purchase.

Now, as with any investment or source of income, you will want to consider the potential tax burden. There is a special place to list income on every tax form that results from your stocks and investments. You will need to track and report all income/loss related to your investment for tax purposes. The tax rate will vary on this income at the state level.

How to Begin Buying Weed Stocks

Once you’re ready to start, you can jump right into your research by first choosing which company you have faith in. This is actually very important in the Marijuana industry. Unlike in other industries where there are dozens, or even hundreds, of key leaders to choose from based on previous performance and recognition, the Marijuana industry is very young. You will want to begin by researching the companies that capture your interest and looking at their practices, values, and projected growth.

Now, let’s break the process down step-by-step.

#1 Do Your Research

The first step in the process is doing your foundational research. Figure out how much you want to invest and whether you’re interested in a company dealing directly with the crop or one that doesn’t touch the plant. Also look into individual industry leaders and check their certifications and compliance with state regulations.

#2 Decide How You Want to Invest

Basically, there are four avenues through which you can invest in Marijuana:

  • Buy stocks of companies that are associated with the Marijuana industry: Scotts Miracle-Gro Co, Cree Inc., etc.
  • Invest in biopharma companies focusing on the Marijuana market: AbbVie Inc., Marinol, etc.
  • Buy Marijuana ETFs (Electronically Traded Funds): Horizons Medical Marijuana Life Sciences ETF among others.
  • Buy Marijuana stocks: Canopy Growth Corp, Aphria Inc., etc.

#3 Join an Investment Platform

You can find Marijuana stocks to invest in at Ally and similar websites. Ally happens to be one of the best options out there, especially if you just started investing recently. With Ally, you can get your account setup in a matter of minutes and start trading on the market with no prior experience. They offer a wealth of analysis tools and information for every stock you consider purchasing, so be sure to explore the website so you know where to find everything.

Luckily, Ally (and most investment platforms) have lots of instructional guides to get you started. It is certainly worth taking the time to explore these guides so you can learn about the specific platform you chose to use and the basics of investing. After all, investing in itself is a huge learning process, and you will want to find lots of information to help you make the right decisions for your investment portfolio.

#4 Lay Out Your Plan

An investment is not something you just throw out there. It needs to be a calculated, measured, and deeply studied transaction that has an end goal in mind, and a plan to get there. That’s why researching the investing process in itself will prove extremely valuable to you. There are so many resources out there that can get you started so you can learn how to read charts, project potential growth, and draw up an exit strategy (something you should do before you ever start investing).

#5 Make The Purchase

With your decision made, your plan drawn out, and all the research you can do on trading and investing taken care of, now is the time to make the purchase. Head to the investing platform you have chosen and decide how much to put down. Finish the transaction and then carry out your plan as written.

#6 Sell Your Investment

Once you have achieved the goal set when you drew up your plan, it is time to sell your investment. A good investor will, of course, take these funds and re-invest them into another stock so they can continue to grow.