Start Low, Go Slow, Or Better Yet, Not At All
Several clients have asked over the past few years about Cannabis stocks. Yet, part of my job is to prevent clients from getting involved with speculative markets and dodgy companies. Nothing says that more than companies selling a product that is essentially illegal on the Federal level, and lacking a functioning banking or financing system in this country.
So, what does one do? First, just ignore it! You don’t have to speculate. You don’t have to fear missing out on a new industry. Isn’t that what lead people into Bitcoin? Isn’t that what people did with 3D printing stocks or internet companies from the past? I’ve been through this before during the dot com days when people felt they HAD to invest in companies with no earnings just because the internet was the future.
Second, if you can’t resist the urge to “be part of a brave new world” at least look in the mirror and be honest. You can throw money into all sorts of “bets” so make sure this is going to make you happier than visiting Las Vegas for a weekend.
If you must . . .
Like I said, don’t. I mean that. This isn’t some type of reverse psychology of “don’t look at this (but really ask me about it).” So how do I answer people who want to speculate no matter what and seek my guidance? Here is what I said on Charles Payne’s Making Money show on Fox Business. My take was simple. Make your own FAANG list for this industry. You look at the stocks with lots of volume that every trader in that part of the market is moving each day.
What am I really getting at? There is no safe way to play an unsafe market segment. You can’t diversify your risk away by buying “related” companies like fertilizer or pharmaceutical firms. Either put your money at 100% risk of loss or don’t play the game. Just realize that most likely, there will be wild swings with zero certainty that any of the stocks today will be around a few years from now. There will be layers of new firms, and even old firms that get into the business.
Like the warning label on a cannabis brownie: start low, go slow. And my corollary: do you really want to do this?