Marijuana is big business.
More than 440,000 full-time jobs were supported by the legal cannabis industry in 2024, according toa reportby Flowhub.
Buying into an emerging industry poised for moonshot growth is enough to make any investors mouth water.
Want to own stock in a marijuana company?Stash, an investing app, gives you a $5 sign-up bonus to invest once you open a Personal Portfolio and deposit $5 into your account.
But the cannabis business isnt like other cash crops.
Its still illegal at the federal level, which can make investing in cannabis stocks tricky.
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Marijuana investments involve risk but is the potential upshot worth it?
Current Marijuana Legislation in the United States
States began legalizing medical marijuana more than 20 years ago.
By late 2023, 40 states plus the District of Columbiapermitted the sale of medical weed.
Recreational use also is booming.
In 2012, Colorado and Washington became the first states to legalize recreational marijuana for adult use.
But progress to legalize marijuana at the federal level remains mixed.
The U.S. Department of Health and Human Services also recentlyrecommended reclassifying marijuanaas a lower-risk drug.
Marijuana is currently a Schedule I drug under the Controlled Substances Act.
The Drug Enforcement Administration, which has final authority on reclassifying marijuana, will review the recommendation.
A reclassification could majorly expand the pot market.
U.S. companies that directly handle marijuana are barred from listing on U.S. stock exchanges.
Before you invest in marijuana, its important to understand different aspects of the industry.
First, there are two broad categories of cannabis products.
Its also legal in more than 30 countries.
A patient needs a prescription from an authorized health care provider to obtain medical marijuana.
Twenty-four U.S. states, plus the District of Columbia, have legalized recreational marijuana for adults.
Recreational use also is legal in several countries, including Canada, Mexico and South Africa.
The marijuana industry supply chain is extensive, spanning manufacturing to marketing.
4 Main Types of Marijuana Businesses
Cannabis growers cultivate the plant.
Some also own production facilities or create cannabis-related products, like hemp.
These companies own dispensaries where people can purchase cannabis products.
These pharmaceutical companies develop prescription drugs with cannabis ingredients.
Because the drug is still federally illegal, investing in U.S. cannabis stocks can be tricky.
Buying shares of cannabis-related companies is one option.
Ancillary firms are listed on U.S. stock exchanges because these publicly traded companies dont deal with the plant itself.
Rewards
Marijuana is a nascent industry.
Getting in on the ground floor is one of the biggest potential rewards for marijuana investors.
Some investors may see this as a prime buying opportunity.
Marijuana stocks arent a good fit forconservative investorswho hate the idea of losing money.
Risks
Investing involves risk.
An asset can lose value as market conditions change.
This holds true for any industry not just marijuana companies.
But pot stocks can be particularly volatile.
Yes, weed is still illegal at the national level, but its more than that.
Companies poised for tremendous growth potential can suddenly underperform, get acquired by another company or even go bankrupt.
In short, taking a chance on inexperienced and obscure companies can devastate your investment returns.
Another risk is investing in companies that exist simply because marijuana is still prohibited under federal law.
Best Cannabis Companies to Invest In
Below is a list of the top marijuana stocks to consider.
Typically, shares of Canadian companies are the easiest pot stocks to buy in the U.S.
But experts are mixed about the growth potential of Canadas publicly traded cannabis companies.
In 2018, our neighbors to the north legalized recreational marijuana, spurring a boom of global investment.
Stock prices soared, crashed, soared and crashed again.
Experts say overexpansion is to blame.
The United States has a much larger and more lucrative marijuana market than Canada.
But American-based cannabis businesses cant list on U.S. stock exchanges.
This leaves U.S. cannabis companies two options: Get listed on a Canadian exchange or trade over the counter.
What Are Over-the-Counter Stocks?
Its also tricky for the average investor to even buy and sell OTC stocks.
Many traditional brokerage accounts restrict or bar trading marijuana stocks on OTC exchanges.
Charles Schwab also lets you buy your own over-the-counter shares using the Schwab One brokerage account.
However, be cautious of trading fees.
Actively managed funds are more responsive to industry shake-ups, like mergers, acquisitions and bankruptcies.
A lot can happen in three months, especially in this industry.
Also confirm to examine the funds recent price movements along with its one-year and five-year returns.
Rachel Christian is a Certified Educator in Personal Finance and a senior writer at The Penny Hoarder.
She focuses on investing, retirement, taxes and life insurance.
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We can’t personalize articles for our readers, so your situation may vary from the one discussed here.
yo seek a licensed professional for tax advice, legal advice, financial planning advice or investment advice.
