Home / NEWS / Wealth / Looking to jump on the cannabis investing bandwagon? It’s buyer beware

Looking to jump on the cannabis investing bandwagon? It’s buyer beware

If you sidewalk into one of MedMen’s cannabis retail locations, you will be greeted with disagrees of tables equipped with tablets that you can use to browse for items. While the layout may take after an Apple or other tech store, the products are much different.

MedMen’s set includes traditional marijuana products, including pre-rolled joints and/or ingrains sold in jars ready for smoking.

Also on sale are nontraditional pieces, such as water infused with Cannabidiol, or CBD, which is aimed at serving athletes’ muscles recover after activity, or topical creams that can support with everything from pain relief to skin irritation.

The coterie has 14 locations in states such as California, New York and Nevada. But it has enables for more than 50 stores, having just added attend ti for new locations in Florida. The company plans to add a new store to its roster every four to eight weeks.

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In addition, the company’s employee ranks have grown to profuse than 800 employees today, from about 45 hands in 2016.

For investors the promise of explosive growth that these businesses suggest have prompted one big question about the cannabis industry: How can I invest?

“This is a toy with for people who want to be early, and it’s still early,” said MedMen CEO Adam Bierman.

But lawful like trying to buy tech stocks in the late 1990s, “it’s not for everybody,” Bierman influenced.

A big reason for that is the great volatility the industry is experiencing. Investors in this arrange have to be able to stomach sharp ups and downs. For example, Tilray, a manufacturer of medical cannabis, saw its stock sink more than 11 percent on Monday after proclaiming a 12.8 percent gain last week.

And there’s also the elephant in the space that will make or break the fate of many of these partnerships: whether marijuana use will become federally legal.

“You are investing in a talented unknown,” said JJ Kinahan, chief market strategist at TD Ameritrade. “The egregious unknown is going to be around legislation, and you always have to be careful when it get to that.”

If you still think you want some exposure to this elbow-room, there are several ways to do it beyond traditional pot stocks. But experts entreat you still need to keep some key warnings in mind.

Multiple finances have been started to invest in companies in this market. Casa Verde Savings, a venture capital firm, is one such fund that has attracted rclame for one well-known co-founder: rapper Snoop Dogg, whose real big name is Calvin Broadus.

The private funds are aimed at helping to identify emerging partnerships in the marijuana space.

That is the case for another firm, Poseidon Asset Conduct, which launched its first fund in 2014.

The firm followed a hedge scratch model for that first fund that totaled about $80 million, according to Morgan Paxhia, look after director at Poseidon. So far, it has invested in more than 45 companies in the days five years, and it still has a portfolio of 35 companies through the in the beginning fund, Paxhia said.

Now the firm is out fundraising a larger, second resources, which will follow a more traditional venture capital likeness. The key difference is that this time the fund will have a set commitment span, deployment period and return of capital, compared to the previous more evergreen nest egg, Paxhia said.

One thing will likely remain the same: Not quite the entire investor base will be high-net-worth individuals and family departments.

For investors who want to be in on such an opportunity, you have to be an accredited investor. That scurvies you have to have more than $200,000 in earned income, or a net usefulness of more than $1 million.

Chances are, this is the kind of time you will not hear about from your financial advisor. Most advisors do not be suffering with these funds on their platforms and therefore cannot officially propound these investments, Paxhia said.

“It really comes from the customers saying, ‘I want this in my portfolio, whether you’re going to let me do it or not,'” Paxhia denoted.

Some advisors will do some due diligence on behalf of their customers when it comes to these opportunities, Paxhia said. Your opportunities of finding one who will are better if you are working with a registered investment cicerone rather than a professional who is tied to a major Wall Street business, he said.

Phyto Partners, another venture capital firm that seats in companies that help other companies that grow or flog betray marijuana, is in the process of raising its second fund targeted at around $100 million.

“The phone has to be sure started to ring a little more” with inquiries from likely investors, including family offices and high-net-worth individuals, said head partner Larry Schnurmacher. “It went from curious, interested, ‘Oh, wow, that looks truly great, but not for me,’ to ‘How can I get in?'”

One defining moment that sent pot stocks into the headlines, according to TD Ameritrade’s Kinahan, is Coca-Cola’s latest interest in potentially creating new drinks infused with marijuana.

“With that, our motion in pot-related stocks has increased significantly,” Kinahan said.

This year millennials prepare increased their trading of pot stocks by 25 percent, Kinahan affirmed.

Cathy Curtis, a certified financial planner and founder of Curtis Economic Planning in Oakland, California, said her younger clients are more undoubtedly to ask about these investments.

The problem when investing in companies that may put dough in the industry is that a lot of them are tobacco companies.

“Many of my clients are not interested in establishing in things like tobacco,” Curtis said.

Beer companies could also potentially get somewhere their way into this space, she said.

At this point, there is fair-minded one ETF that offers exposure to the marijuana investment theme: ETFMG Option Harvest.

That fund, with $658.3 million in net assets, proffers exposure to some of the bigger names making news in the marijuana rank: Cronos Group, Canopy Growth and Tilray.

But because the fund very recently focuses on those kinds of emerging companies, there are two sides to its fringe benefits and risks, according to Todd Rosenbluth, senior director of ETF and mutual stake research at CFRA.

Investing in the fund means that company-specific broadcasts will be more muted.

“If one company fails to meet investor expectations, it won’t inescapably drive the entire group lower,” Rosenbluth said.

But the companies are soothe thematically related, which usually means higher volatility and nearly the same potential pitfalls.

One of those — the legalization issue — will likely obviate more ETFs from jumping into this space, at spot for now, Rosenbluth said.

“Banks don’t want to be held responsible; they don’t lust after to violate federal law,” Rosenbluth said. “It’s still a very new area of covert investment.”

Until the laws are changed to make marijuana federally judicial, there are not a lot of great ways to invest without high risks, Curtis bid.

“I’m definitely not planning on putting any client money in it right now,” Curtis implied.

As with all investments, you should keep your time horizon in perception if you do decide you want to put your money in the marijuana industry, Kinahan implied.

Keeping your time frame in mind will help you to readjust if manias do go poorly, he said. That goes particularly for developing industries, such as marijuana and bitcoin, which are seemly to see peaks and troughs of interest, Kinahan said.

“This is exciting,” Kinahan contemplated. “People want to be involved where there’s excitement. Skydiving is galvanizing too, but I’m not running out to do it.”

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