It goes without saying that the Cannabis Stocks has recently exploded and more people are looking to invest in it. Well, as much as people are looking to invest in marijuana stocks, there is still the question of whether these stocks and markets are volatile. There is the need to understand if the market will work good for you always.
The distribution
What you need to understand is that most of the pot stocks currently are focused on increasing production. The fact is that the demand is always growing and so are the companies that have to produce marijuana. An example is Aurora Cannabis, the brand has exponentially grown in terms of capacity over the years. With more capacity, the stock is able to also maintain its value as compared to others that cannot adapt.
The brand has also signed agreements with various distribution chains. This ensures that its products will be able to reach more people within a short time. This helps a lot for the brand’s stocks to remain competitive.
Medical marijuana
The medical marijuana is not just something you can overlook. Even when we are now in the phase of more companies investing in recreational marijuana, there is still demand for medical marijuana. In top markets for medical marijuana such as Canada, it is expected that the market would reach up to $2.31B. This means that it will be able to grow 86% in just four years. This is an impressive growth even for the stocks.
Even when there is so much potential in the marijuana market, it does not mean you invest in any stock at any time. Let us get to see some of the marijuana market warnings for investors.
Having excess liquidity does encourage new bubbles in the system
It is self-explanatory that when you have an overabundance of the asset class often leads to an asset bubble. This is the reality at the moment when it comes to the pot stocks. Thousands of companies are now listed and anyone can trade on their stocks. That is not the same when you go back a few years ago.
Take an example of how people were led to believe bitcoin is the next big thing. Well, the problem is that the bitcoin was hit with rising interest rates and inflation. This definitely led to the plunge in bitcoin value.
Pot is a commodity
Pot has to be considered as a commodity also. This is because if given chance, the farmers can grow it as a surplus crop in no time. Just like other commodities such as metals, oil, and natural gas, they are all subject to busts and booms. You can see that marijuana is still part of this.
The companies will definitely face ups and downs when it comes to growing the marijuana. The company definitely has to turn a profit at the end of the day.
Complying with FDA rules
America still have one of the largest Cannabis Stocks. If you want to have your product sold in America, it has to comply with the FDA rules. They are not always easy to follow as there is a level of quality that is needed. With some regulations in place, it might not be easy to make good money as a marijuana company. Nevertheless, when you comply with the regulations, you should be able to access a huge market.
