Pot is a booming business, and many are eager to be a part of the “green rush” by investing in marijuana-related businesses. But savvy investors know that just because an idea sounds good doesn’t make it profitable.
If you would like to invest in marijuana stocks, it’s important to know what you’re investing in. You see, you are not alone in your interest in the marijuana marketplace, and some slimy little “companies” know just how attractive marijuana investments are.
These companies, which offer “penny stocks” to make them more attractive to the novice investor, will create a business specifically to attract investors with no intention of actually increasing profit, leaving vulnerable newbies to pay the price. Some of the companies that are under investigation for possible illegal activity include GrowLife (PHOT), FusionPharm (FSPM), Advanced Cannabis Solutions (CANN) and CannaBusiness Group (CBGI).
This is not to say that all penny stocks are bad. It does imply that these stocks are smaller and perhaps more likely to fail, but it doesn’t mean that you should limit yourself to stocks costing $25 or more per share either.
To invest wisely in the marijuana marketplace (as with any investment), it’s important to look at a few key areas to make sure the company you’re investing in wants to invest in you, too.
What is the company’s background? Before buying stock in a company, make sure they are one you are comfortable supporting. Check their website for a mission statement and any other information you think is pertinent. If you think that the company is worth investing in after all of this, then many other people will, too.
What do others have to say about the company? Do your research, and don’t stop at a few favorable forum posts, either. Seek out unbiased opinions about the company to indicate whether or not they will maintain earning potential.
Where is the stock traded? Some smaller stocks don’t qualify to trade through the Nasdaq Stock Exchange or national exchange. Instead, they trade through an OTC (over-the-counter) system which is much more vulnerable to manipulation. If you still think it may be a good investment, proceed with caution.
Does the pitch seem over-inflated? Scammers are usually very good at story-telling, even if the story isn’t accurate. If a company seems too good to be true, or if you encounter a pushy salesman or advertisement, consider that a red flag and do your due diligence.
What does EDGAR think about it? EDGAR, or the Electronic Data Gathering, Analysis and Recovery system, is designed to provide a company’s financial information to the general public. Though some companies are not required to file with EDGAR due to financial problems, most companies worth investing in should have an EDGAR report.
The stock market is always changing, and introducing a marijuana market into the mix is only making things more interesting in the world of investing. If you’ve been thinking about investing in a marijuana-related business, understand that the money you invest could grow exponentially or could hit rock bottom.
Fortunately, you can increase your odds of success by conducting careful research and planning your stock purchases carefully.
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