Finance Monthly September 2021 Edition

53 www.finance-monthly.com INVESTMENT - CANNABIS STOCKS demand. This has seen prices fall and revenues suffer. How to invest in cannabis stocks There are numerous companies providing services to the cannabis industry, meaning investors have a wide choice of stocks or ETFs. • Step 1: Research the company Research is an essential part of making any investment. You should check out the latest news surrounding a given company, gain a feel for the market sentiment on platforms such as Stocktwits, and check SEC filings and other documents required by diverse regulatory agencies. • Step 2: Decide how much you want to invest Stocks are volatile and the future is unpredictable. As a rule of thumb, you should never invest more than what you can afford to lose. Although thorough research often leads to strong returns, there’s no guarantee that this will always be the case. • Step 3: Determine your timeline When you buy and sell can make a big difference, so it’s important to consider your timing carefully. However, you should note that it can be very difficult to time the market correctly. An investment strategy that may be worth considering is dollar-cost averaging (DCA). This is a strategy in which an investor divides the total amount that they wish to invest across periodic purchases of a target asset. DCA can help to limit the impact of volatility on the overall purchase. • Step 4: Choose your broker A broker serves as an intermediary between an investor and a securities exchange. Choosing your broker isn’t dissimilar to picking a stock, it starts with understanding your investing style and determining your investment goals for the short and long term. Apps like Freetrade and IG are great places to start. • Step 5: Buying your stock For beginners especially, the process of actually buying stock can be trickier than it initially sounds. “There are generally 2 types of ‘buy’ orders: market order and a limit order. A market order will execute the purchase at the present market price, while a limit order will only execute if the price falls at or below the limit price,” Benzinga’s Thomas Rudy explains. “Although a limit price might give an investor a lower price of entry, there is no guarantee that the limit order will execute.” Are cannabis ETFs a sensible option? Another way to invest in cannabis stocks is through cannabis ETFs (Exchange Traded Funds). ETFs are similar to mutual funds but there are a few key differences. As with mutual funds, ETFs invest in a diverse range of securities and offer automatic diversification to shareholders. Instead of buying shares of an individual stock, investors buy shares in the ETF. They are entitled to a corresponding portion of its overall value. One key difference between ETFs and mutual bonds, however, is that ETFs are traded on the open market, meaning ETF shareholders can buy and sell shares of an ETF whenever they choose. ETFs are popular investments because they can be bought and sold easily and because they are generally inexpensive. ETFs also involve fewer fees than other types of investments and are more tax-efficient than mutual funds. Although there is some degree of risk with any investment, ETFs can be very safe investments provided you do sufficient research first. As cultural tolerance of cannabis increases across the globe, a plethora of opportunities open for companies and investors alike. However, as with any investment, it is important to do your research carefully and weigh up whether or not it’s a sensible addition or start to your portfolio. “As cultural tolerance of cannabis increases across the globe, a plethora of opportunities open for companies and investors alike.” This article does not constitute financial advice. The author and Universal Media Ltd. are not qualified financial advisers. All investments are made at the reader’s own risk.