Budding Investments

I was recently on a visit to a state where marijuana is legal, and I was struck by what a business it is out there! I’m not much into drugs myself, but I never thought about all of the money that would be flowing back and forth in a place where marijuana is legal. I saw people spend large amounts on drugs and paraphernalia, and I was kind of blown away. So that all got me thinking--how do I invest in the marijuana industry? It seems like it’s going to be a business that will keep growing (no pun intended) for a long time to come.

There’s no denying that the marijuana business has really taken off in the years since the legalization trend began. Where there was once no industry at all (or at least no legal one), there is now a huge and thriving one with $10 billion in sales. By 2020, the marijuana business will create more jobs than America’s manufacturing sector.

And investors are going along for the ride, economists say. It is entirely possible to invest in recreational and medical marijuana stocks, and doing so is legal and--in some cases--can be profitable.

Will your investment choice be a sound one? Perhaps. Marijuana does seem poised for growth, with new states legalizing the drug and public opinion pushing more states to do the same. With that said, however, the federal government has taken some steps in the opposite direction.

Ultimately, like every other industry, the marijuana industry is not a panacea. Investments in marijuana may go up, but they may also go down. And while there’s nothing wrong with taking a risk, especially as a young investor with year of earning potential ahead of you, you’ll still want to be careful. Don’t invest more than you can afford to lose, and maintain a diverse portfolio with some “safer” investments in things like index funds, large companies, and bonds. Speak to a financial advisor if you’re not sure how to strike the right balance. Remember, if you put all of your investment cash into marijuana, a bad turn for the industry could mean that your hard-earned money goes--if you’ll pardon the expression--up in smoke.

If you can manage to invest in a diverse portfolio and include marijuana stocks in your holdings, you should be able to insulate yourself from financial disaster while still exposing yourself to some of the upside that may be available in marijuana investments.

“To be able to make a choice is such a privilege.” -- Sarah Jessica Parker