Cannabis investing – the basics!

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Failure to do adequate due diligence is a common mistake investors can make.  Before making your first investment you must do your homework.  Be prepared to diversify into more than one stock but be careful to not over diversify which will create to much exposure for yourself in your overall portfolio.

1. Review disclosure documents such as prospectus, listing statements and offering memorandums which include information on the business it’s management, operations and risks.

2. Read annual reports, visit news releases, websites and try to determine if the company is making money.

3. Consider speaking to an advisor who can provide perspective and help you select investments to achieve your financial goals.

4. Learn as much as you can by accessing articles, tools and resources.  We like the site at GetSmarterAboutMoney.ca where you can learn more about investing, including the risk-return relationship

Cannabis investment could occur in the following segments

  • Agriculture technology: Businesses that support the innovation and development of equipment required to cultivate cannabis, such as automated fertilizer systems, greenhouse technologies and improved lighting systems.
  • Ancillary products and services: Businesses that offer products that complement the cannabis industry as a whole.  Examples are insurance, transportation, packagers and marketers.
  • Biotechnology: Businesses that focus on the pharmaceutical applications of cannabis by developing treatments to target illnesses and diseases.
  • Consulting services: Businesses that respond to the complexity of rules and regulations around cannabis between different jurisdictions. They may provide services to assist with licensing, zoning or advising on operational processes.
  • Consumption devices: Businesses that create products that people use to consume cannabis.
  • Cultivation: Businesses that grow cannabis – these can be organic farms
  • Retail: Businesses sell adult-use or medicinal cannabis
  • Cannabis products and extracts: Businesses that sell cannabidiol products, edibles, topicals, drinks and other products to Retailers.
  • Holding companies: Businesses that typically own a considerable number of voting shares in a variety of cannabis companies, allowing them to influence the management and affairs of the companies held.
  • Industrial hemp: Businesses that provide products using industrial hemp, which is different than cannabis and may have numerous applications and uses, including creating consumer products like paper and clothing, as well as building materials, fuel and foods.

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