Three Reasons Marijuana Stocks Are A Risky Investment

With the legalization of marijuana in many US states comes a unique opportunity for investors. People can now invest in what is being called marijuana stocks. But one has to ask themselves, what are the risks of investing in something so new and different?

Today, we are going to take a look at marijuana stocks and see why they can be a risking investment for some.

As we’ve stated above, these stocks have their benefits but also come with unique risks. Below we will learn three different reasons why you may want to rethink on investing in these stocks.

Lack of Public Support

While there may be a lot of people rallying behind the legalization of pot, the public as a whole quite often doesn’t feel the same way. If you have a stock that people simply can’t get behind, there is a risk that the company that issues the stock could face failure.

Many of these marijuana stocks are medical-related and these companies are still going through trials. If their products don’t perform the way it’s expected, things for the company and its stock could go sour. This would put your investment at risk and you could even lose your entire investment if you wait too long to pull out.

A Federal Crackdown

With Republicans in the White House, you just might see a new federal crackdown on marijuana that could spell the end of the budding industry. Jeff Session, the new Attorney General, has already expressed interest in cracking down on states that have legalized pot.

This could have a disastrous effect and if you have invested heavily in marijuana stocks, you might be putting a huge part of your portfolio at risk. The worst part is you can never predict when the federal government might bring down the hammer on legalized pot. As you probably already know, the federal government still list marijuana as a drug and they have power over the states.

Too Many People in the Game

Right now, the industry is getting flooded with new companies that offer a wide range of different types of marijuana both recreational and medical. These companies often pop up overnight and start selling stock. This means that the competition is super high and many of these companies will probably not be around in a few years.

Some will even fold in a few months of operating if they can’t come up with unique products. On the other hand, companies that have submitted their medical marijuana products to the FDA for approval may be spared. These types of companies have gone through all the right processes to protect their brand and help their products stand out from the rest.

Final Thought

As you can see, investing in marijuana stocks can be a tricky and risky move. But if you are willing to do your homework and have money that you can afford to lose, you just might find yourself reaping the rewards. There is no doubt people are getting rich off legal marijuana. As for now, the industry is booming.

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