Become A Featured Company

How to Manage Risk When Investing in Cannabis

Jason Mueller

September 6th, 2017

Policy

Risk in investing is inevitable: in fact, it can be said that the only way to earn through investment is by taking risk. Despite the inherent risk of the market, investors have long touted risk management as the key behind how they keep their losses small and their profits large. Risk management plays a factor in all investment, therefore, it plays an essential part in investing in the cannabis industry.

Amounting to $6.7 billion dollars of sales in 2016 and growing, the cannabis industry seems like a no-lose investment to the inexperienced investor – luckily for those reading, this article will describe some ways to mitigate risks specifically in the cannabis industry.  Plenty of this knowledge is cross-applicable to investing in general, but when analyzing the cannabis industry separately from the rest of the market, there are some aspects of risk that are unique as well.  Read on to discover the top risk managment techniques when investing in the cannabis industry.

Diversification

First and foremost when speaking of risk management in investing, diversification must be discussed first.  Diversification means investing across many mediums and companies for the sake of portfolio stability.  For example, many people understand that Apple (APPL) is a successful company: the difference between diversified investment into Apple versus an inexperienced investor simply “buying Apple stock” is that the diversified portfolio will not only include Apple, it would also include competing tech companies and companies outside of the tech sector. This helps offset losses should Apple stock go down, while also providing the long-term ability to profit by holding the blue-chip APPL stock through slight recessionary events.

In terms of cannabis, diversification could not be more important.  A single, publicly-traded company in the cannabis industry always has the potential of being devastated by a Federal crackdown on cannabis law.  Though many States have State-sponsored legislation legalizing cannabis, the Federal illegality of the plant under the CSA means that any and all canna-businesses are at greater risk of sudden shutdown than companies without legal ambiguity.  While this is possible, it’s very unlikely that the Federal government will shut down medical or recreational cannabis in States that have ushered them in – simply by diversifying your portfolio, you practically eliminate the risk that your portfolio will lose all value in the case of a major Federal move against cannabis.  Think of all of the companies in the cannabis industry that don’t produce or sell cannabis:  grinder companies, glass blowing companies, and other cannabis accessory providers are great to diversify with as they run no risk of being raided by the Feds.

Fundamentals

Another incredibly powerful way to manage risk when dealing in the cannabis industry is by investing in well-established companies that show good fundamental indicators.

While many companies may seem well-established, proper risk management when investing in them dictates that investors should review each company’s financial stability by looking at their fundamental indicators.  Many companies explode onto the scene to unprecedented growth, only to dwindle and fold within a matter of months.  It is essential to research companies that you plan on investing in – look at their profit/ loss ratio and make sure that they are solvent, as well as other fundamentals like trading volume, historic highs and lows, and more.

Also be sure to look into the management teams of companies that you hope to invest in – experience and education go a long way, and if you blindly invest in a canna-company, you run the risk that company management will run their company into the ground, thus dissolving your investment fund into a bitter memory.  Always look at fundamental indicators for long-term investing.  If you plan on “buying and holding”, it is extraordinarily important to know that your investment will grow as the company grows.

Risk is an inherent evil of investment, but in the cannabis industry, a little risk can have a big reward.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Jason Mueller

Network Partners

Follow Us on Social Media

LinkedIn

About CFN Media Group

CFN Enterprises Inc. (OTCQB: CNFN) owns and operates CFN Media Group, the premier agency and financial media network reaching executives, entrepreneurs and consumers worldwide. Through its proprietary content creation, video library, and distribution via www.CannabisFN.com, CFN has built an extensive database of cannabis interest, assisting many of the world’s largest cannabis firms and CBD brands to build awareness and thrive. For more information, please visit www.cfnenterprisesinc.com.

Disclaimer: Matters discussed on this website contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. CFN Media Group, which owns CannabisFN, is not registered with any financial or securities regulatory authority and does not provide nor claims to provide investment advice or recommendations to readers of this release. CFN Media Group, which owns CannabisFN, may from time-to-time have a position in the securities mentioned herein and will increase or decrease such positions without notice. The Information contains forward-looking statements, i.e. statements or discussions that constitute predictions, expectations, beliefs, plans, estimates, or projections as indicated by such words as "expects", "will", "anticipates", and "estimates"; therefore, you should proceed with extreme caution in relying upon such statements and conduct a full investigation of the Information and the Profiled Issuer as well as any such forward-looking statements. Any forward looking statements we make in the Information are limited to the time period in which they are made, and we do not undertake to update forward looking statements that may change at any time; The Information is presented only as a brief "snapshot" of the Profiled Issuer and should only be used, at most, and if at all, as a starting point for you to conduct a thorough investigation of the Profiled Issuer and its securities and to consult your financial, legal or other adviser(s) and avail yourself of the filings and information that may be accessed at www.sec.gov, www.pinksheets.com, www.otcmarkets.com or other electronic sources, including: (a) reviewing SEC periodic reports (Forms 10-Q and 10-K), reports of material events (Form 8-K), insider reports (Forms 3, 4, 5 and Schedule 13D); (b) reviewing Information and Disclosure Statements and unaudited financial reports filed with the Pink Sheets or www.otcmarkets.com; (c) obtaining and reviewing publicly available information contained in commonlyknown search engines such as Google; and (d) consulting investment guides at www.sec.gov and www.finra.com. You should always be cognizant that the Profiled Issuers may not be current in their reporting obligations with the SEC and OTCMarkets and/or have negative signs at www.otcmarkets.com (See section below titled "Risks Related to the Profiled Issuers, which provides additional information pertaining thereto). For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. CFN Media Group, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity-based compensation in the companies it writes about, or a combination of the two. For full disclosure, please visit: https://www.cannabisfn.com/legal-disclaimer/. A short time after we acquire the securities of the foregoing company, we may publish the (favorable) information about the issuer referenced above advising others, including you, to purchase; and while doing so, we may sell the securities we acquired. In addition, a third-party shareholder compensating us may sell his or her shares of the issuer while we are publishing favorable information about the issuer. Except for the historical information presented herein, matters discussed in this article contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. CFN Media Group, which owns CannabisFN, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. CFN Media Group, which owns CannabisFN, may from time to time have a position in the securities mentioned herein and will increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice and that of their own professional advisers. CFN Media Group, which owns CannabisFN, may be compensated for its Services in the form of cash-based and/or equity- based compensation in the companies it writes about, or a combination of the two. For full disclosure please visit: https://www.cannabisfn.com/legal-disclaimer/.

Copyright © Accelerize Inc. · All Rights Reserved · Privacy Policy · Legal Disclaimer

loading