Investing in the Legal Cannabis Industry: A Beginner’s Guide

 The cannabis industry is gaining momentum to go mainstream as a business industry in the coming years, thus, creating countless opportunities for investors and entrepreneurs. Since many countries have legalized the use of marijuana, the industry is set to grow at a fast pace.

While the emerging cannabis market holds a lot of potential, many people fear investing in startups in such an industry. However, there are many reasons why investing in the market can prove beneficial to you.

Investing in the cannabis industry remains a tricky topic, making potential real estate and potential private investors ponder a lot before taking on the controversial industry. If you are a beginner and thinking the same, read on to know everything you need to before investing in the cannabis industry.


Has long-term potential to grow

With legalization, the cannabis market and recognition of cannabis legitimacy is booming and the industry is expected to grow. The industry is set to expand significantly, owing to the widespread and continual consumption of cannabis for both—quasi-legal medicinal and illicit recreational purposes. 

Thus, investors forecast a tremendous growth for the cannabis industry worldwide, making the market a potential long-term investment.


Demand is skyrocketing 

With many American states and other countries driving the “legalization of marijuana” campaign, the revenue figures indicate that the cannabis industry is witnessing a booming customer demand. It is being widely used legally used for medical and recreational purposes, thus, encouraging the “bulls” of the stock market to invest in the booming cannabis business.

This has also led to the growing acceptance throughout the Western world and several other corners of the developing world. Therefore, cannabis decriminalization has changed the long-term global outlook, making the future of the cannabis market quite bright.


Lucrative revenue generation

Since the legalization cannabis is becoming larger, more companies are likely expected to join the public listings, which will create an economic boom in the industry. Many statistical reports have shown that cannabis investing is generating excellent revenue, and will become more lucrative in the coming future. Therefore, invest in the market now to likely generate huge returns.


Choosing the right cannabis stocks

If you are a beginner and want to invest in cannabis stocks, it is extremely important for you to research and know what you are you stepping into. Dozens of cheap cannabis stocks are available in the open market that can seem tempting; however, often there is very little information about them, or the stocks have not been on the market for long. Therefore, since it’s already a bit risky to invest in the cannabis market in its blooming years, you can follow these steps to look for a legit cannabis stock to invest. 

  • Check if it is a trade or an official.
  • Remain informed about the company’s market capitalization. The larger the cap, the better for you.
  • See if the analysts are taking those stocks seriously.

Choosing the right companies to invest in

There are six main types of cannabis companies you should consider when starting to invest in cannabis stocks, which are-

  • Cannabis Growers

Cannabis growing companies are usually farmers who specialize in the cultivation of the cannabis plant and harvest their flowers and leaves for other products. While some cannabis growers sell their final products directly to consumers, the majority of the most successful ones follow distribution networks and sell their finished products in wholesale to cannabis stores.

  • Cannabis Stores

The vast majority of cannabis stores purchase cannabis and its derivatives from growers at a wholesale price and work their way out like any other retailer. But some of them focus on the sale of finalized cannabis products that they have grown themselves.

  • Energy providers 

The largest expense for most cannabis growers is energy consumption. Since the cannabis plant requires specific environmental conditions for better growth, the majority of cannabis growers prefer growing the crop inside where humidity, temperature, and other climate-related factors can be controlled. To prepare such specific conditions, they require the use of high-energy lighting systems, filters, fans, and more equipment. 

Therefore, as a result, electricity consumption is quite high for cannabis growing companies, thereby leading to huge expenditures on bills. So, to deal with energy issue, a small subsector of the cannabis industry is emerging to reduce the energy cost associated with cannabis production by promoting the use of renewable energy alternatives like solar, wind, and water energy. Therefore, you can invest in these as well.

  • Manufacturing Companies

The cannabis’ plant’s flower, or dried cannabis, is the most widespread form of cannabis consumed by the consumers and is highly in demand; however, the consumer demand for other cannabis-derived products such as its extracts and edibles is soaring high too. Therefore, you can invest in such companies that focus on the extraction and manufacturing business.

These companies purchase cannabis flower and other plant parts from growers directly, and process these raw materials into final products that can be directly consumed by the consumers. 

  • Equipment manufacturers

Since cultivating and transporting cannabis is a science and no easy task, carrying out the process effectively requires the use of advanced growing equipment. This equipment may include lighting systems, hydroponic systems, fertilizers, proprietary growing mediums, and much more. Therefore, you can invest in these companies which manufacture specifically designed equipment for the cultivation of cannabis. 

  • Biotech Companies

Since the cannabis has long been known to possess powerful medicinal qualities and its legalization for medicinal purposes is gaining momentum, it’s time for cannabis medical and biotech companies to step in. With cannabis-based medications being readily available on the market recently pharmaceuticals are engaging in the development of a cannabis-based treatment designed for severe forms of epilepsy and other diseases. Also, several other biotechnology companies that are also developing treatments using cannabis for a wide array of medical ailments make them lucrative investing options, which can give you an opportunity to profit from the development of potentially life-saving drugs.


How much can you invest in cannabis stocks?

Before investing in cannabis stocks, you must remember not to invest more than you have. Also, since every investor is unique, with their own appetites for risk, and a unique combination of initial capital and long-term goals, you should not invest in looking at other investors. It would be best if you always spoke to your financial advisor first as they are best qualified to answer the question for you. However, considering the factors mentioned above can greatly help you to dial down your allocation strategy regarding investing in cannabis industry in its initial phases.

Also, keep in mind to keep your appetite for risk to be moderate once you are just starting out.



Looking at the trends of marijuana’s widespread usage, cultural tolerance, and the unstoppable campaign to legalize it at the state level, the growth of cannabis industry is expected. However, the industry will still remain full of risk and quite dicey for investors with individual stocks.

Therefore, before investing in the cannabis industry, you need to become familiar with its work and plan your investment, keeping the above concerns in mind. But once you have done the research, there is enormous potential for growth and profit waiting for you.