## How to Invest in Cannabis Stocks in 2020
The cannabis industry is one of the fastest-growing industries in the world. In 2019, the global cannabis market was valued at $150 billion, and it is projected to reach $272 billion by 2025. This growth is being driven by the legalization of cannabis in more and more countries, as well as by the growing popularity of cannabis products for both recreational and medicinal purposes.
As the cannabis industry continues to grow, so too does the number of cannabis stocks that are available to investors. In 2019, there were over 100 cannabis stocks listed on major exchanges around the world. These stocks represent a wide range of companies, from large, established producers to small, up-and-coming startups.
Cannabis stocks can be a volatile investment, but they can also be very rewarding. In 2019, the S&P 500 Index returned 18.4%, while the Horizons Marijuana Life Sciences Index ETF (HMMJ) returned 33.5%.
If you are interested in investing in cannabis stocks, there are a few things you should keep in mind.
### How to choose a cannabis stock
When choosing a cannabis stock, it is important to consider the following factors:
* **The company’s business model:** There are a variety of different business models in the cannabis industry, including cultivation, processing, distribution, and retail. Some companies focus on one aspect of the industry, while others offer a more comprehensive range of services.
* **The company’s management team:** The management team is responsible for making the decisions that will determine the company’s success. It is important to research the management team and make sure that you are comfortable with their experience and their vision for the company.
* **The company’s financial performance:** The company’s financial performance is a good indicator of its health and its ability to grow. It is important to look at the company’s revenue, earnings, and cash flow to get a sense of its financial strength.
### How to buy cannabis stocks
Once you have chosen a cannabis stock, you can buy it through a broker. There are a number of different brokers that offer access to cannabis stocks, so it is important to compare their fees and services before choosing one.
When you buy a cannabis stock, you are buying a share of the company. This means that you will own a piece of the company and you will be entitled to a portion of its profits.
### The risks of investing in cannabis stocks
Investing in cannabis stocks can be a volatile investment. The industry is still in its early stages of development and there are a number of risks that investors should be aware of.
One of the biggest risks is the regulatory risk. The cannabis industry is heavily regulated and there is always the risk that changes in regulation could harm the industry. For example, in 2018, the United States Drug Enforcement Administration (DEA) raided several cannabis businesses in California, causing the stock prices of many cannabis companies to drop.
Another risk is the competition risk. The cannabis industry is becoming increasingly competitive as more and more companies enter the market. This competition could lead to lower prices and margins for cannabis companies.
Finally, there is the financial risk. The cannabis industry is capital-intensive and there is always the risk that companies will not be able to raise enough money to fund their operations. This could lead to bankruptcy or financial distress for some companies.
### The potential rewards of investing in cannabis stocks
Despite the risks, there are also a number of potential rewards to investing in cannabis stocks.
One of the biggest rewards is the potential for growth. The cannabis industry is still in its early stages of development and there is a lot of room for growth. As more and more countries legalize cannabis, the demand for cannabis products will continue to grow. This could lead to significant growth for cannabis companies.
Another reward is the potential for dividends. Some cannabis companies pay dividends to their shareholders. This can provide investors with a steady stream of income.
Finally, there is the potential for capital gains. If the stock price of a cannabis company increases, you will make a profit on your investment. This can be a significant source of wealth for investors.
### Conclusion
Investing in cannabis stocks can be a risky but potentially rewarding investment. If you are considering investing in cannabis stocks, it is important to do your research and understand the risks involved. However, if you are comfortable with the risks, investing in cannabis stocks could be a great way to participate in the growth of one of the fastest-growing industries in the world.
### Additional tips for investing in cannabis stocks
In addition to the tips above, here are a few additional tips for investing in cannabis stocks:
* **Start small:** Don’t invest more than you can afford to lose.
* **Diversify your portfolio:** Don’t put all of your eggs in one basket. Spread your investment across a variety of cannabis stocks.
* **Be patient:** The cannabis industry is still in its early stages of development. It takes time for companies to grow and become profitable. Don’t expect to get rich quick.
* **Stay informed:** The cannabis industry is constantly changing. Stay up-to-date on the latest news and developments.
* **Consider your risk tolerance:** Investing in cannabis stocks can be a volatile investment. Make sure you are comfortable with the risks before you invest.