Cannabis investing is being called the new gold rush for good reason.
Cannabis investing is being called the new gold rush for good reason.
It’s rare when investors have a chance to get in on a ground-floor opportunity that can lead to life-changing wealth.
Buying the right cannabis stocks now could be like buying Apple or Microsoft when they first went public. The only difference is the cannabis industry is going to be bigger and move faster than anything we’ve ever seen before.
That’s why inexperienced and experienced investors alike want to know how to get in on the booming marijuana market right now. They want to invest in the “Apple” and the “Microsoft” of cannabis.
To do that, it all starts with cannabis IPO (initial public offering) investments.
This is when a company decides to open its door to the public. Those who buy shares own a piece of the company and all the rewards and risks that come with being a shareholder. In turn, the company uses that money to hire staff, expand operations, build out its technology, and do a bunch of other things that will hopefully help the company make more money down the road.
The more money a company makes, the more investors want to own it, and those investors are generally willing to pay more to get a piece of it.
Of course, with cannabis investing in general being so new, we here at the National Institute for Cannabis Investors wanted to take some time and help answer some common questions potential cannabis investors typically have.
If you’re new to the investing world, everything can seem intimidating.
However, we’re going to break things down and cut out all the financial jargon.
Today, we’re going to show you exactly how to get up and running and ready to invest in your first cannabis IPO, and it’s easy to get started!
It doesn’t matter if you live in a state where cannabis is illegal. With the right large brokerage firm, you are going to be able to have the option to buy shares of cannabis companies that are listed on the Nasdaq, New York Stock Exchange, Canadian Securities Exchange, Toronto Stock Exchange, or through over-the-counter markets (OTCMKTs).
Now, before we get any further, we want to clear up one of the biggest misconceptions about cannabis IPOs and IPO investing in general.
Let’s jump right in…
Part 1: What to Know about Cannabis IPOs
One of the biggest misconceptions about cannabis IPOs is that there is a way to get in “early” before the company goes public. The only people who are normally able to buy shares of a private company are hedge funds, big banks, and well-connected investors.
There just isn’t a way for the average retail investor to own shares of a company like Facebook before everyone else can buy it.
However, you still can make a ton of money with cannabis IPO investing.
Just take a look…
| Company | IPO Date | IPO Price (Close) | Peak Price | Gain from Peak |
| Aurora | 12/16/2014 | $0.73 | $16.24 | 2,125% |
| Canopy | 4/4/2014 | $2.59 | $76.68 | 2,861% |
| Cronos | 2/4/2019 | $0.80 | $32.95 | 4,019% |
Over the past few years, for those who have taken the risk, cannabis IPO investing has been extremely profitable.
Those won’t be the only big gains the industry will offer.
Of course, there are risks when it comes to investing, and that is especially true with cannabis stocks. You should never invest what you can’t afford to lose. That makes you emotionally attached to your investments, and when you are emotionally attached, it is hard to think logically.
That’s why it’s a good idea for many new investors to start small so they don’t get overwhelmed.
Now, if you already have a brokerage account, you can skip the next section. If you don’t, then you will need to check it out in order to start buying cannabis stocks.
Part 2: Opening a Brokerage Account
Before getting into a cannabis IPO, you need to set up an account with a broker.
To make it easy, we have included a list of brokers to help you get started. It’s fairly simple to set up an account online and can take as little as 10 minutes. But if you find you need additional help, we have included the website for each company.
When your account is set up, you will be able to transfer money from your bank account into your brokerage account and buy a cannabis IPO.
The brokers listed below will allow you to trade stocks listed in the U.S. and Canada.
| Charles Schwab | Fidelity | Interactive Brokers |
There is no minimum balance for a Charles Schwab account, and the commission fee for stock trades is $4.95. Fidelity also has a $0 account minimum and charges $4.95 per trade. Interactive Brokers has a different price structure in place than most other brokers, and you can dive more into those details here.
Our members have also said they’ve had success with trading Canadian stocks on TD Ameritrade, but you will need to call in and talk to a live broker to make such a trade. TD Ameritrade does not have a minimum to open an account and charges $6.95 per trade.
You can’t buy Canadian stocks on E-Trade or TradeStation Group Inc., but you can buy stocks traded on major exchanges and on over-the-counter (OTC) markets. On E-Trade, you need a minimum of $500 to open an account, and it costs $6.95 per trade. TradeStation charges $5 per trade and has an account minimum of $5,000.
Now, let’s talk about how much money you need to get started with your cannabis investments.
Part 3: How Much Money Do I Need to Invest in Cannabis IPOs?
New investors ask this question a lot, but the only person who can answer it is you.
The National Institute for Cannabis Investors cannot offer personalized financial advice. On top of that, no one knows your risk tolerance better than you.
But a good rule of thumb for any type of investment is that you should never invest what you can’t afford to lose. When people become emotionally tied to their investments, they make rash decisions – and that can lead to a big loss.
We can’t stress that enough.
For example, you shouldn’t take the money you normally put towards a mortgage or a car payment and buy stocks with it. In any investment, there is always a chance that you could lose all of your investment, and then you would be in a very tough spot.
If you’re in this for the long haul, patience is going to be your friend.
You don’t have to place all of your money in one particular stock all at once. Over time, you can slowly build a position.
For a specific example, you will have to pay whatever the shares are trading for. If the shares of a company are trading for $10 per share and you want 10 shares, you will have to pay $100 (not including commission fees).
That’s why it’s important to determine how much money you want to dedicate to your cannabis investments each week, month, quarter, or year. You will want to do that well in advance of actually buying a stock, so take your time making a game plan!
Part 4: What to Do on the Day of the IPO
When a company begins trading on an exchange, that is when you will be able to buy shares. Of course, you must have your brokerage account set up before this.
You can do it all online, but if you need additional help, you can always call in to the customer service department at your brokerage firm. They should be more than able to help walk you through the process.
The stock may not begin trading right away, but you should be able to buy shares at some point during the day shortly after the market opens.
When investing in cannabis IPOs on your own, there are a few things you can do.
One is to put in a limit order on the maximum price you are willing to pay the first day a company goes public. That’s part of being a tough and patient trader and trying to get in at the best possible price.
However, if you believe in the company for the long haul and you can see yourself holding onto the stock for a decade or more, it really doesn’t matter if you pay for the stock while it’s trading at an intra-day high.
So if you really want a piece of the company, you can buy shares as soon as it starts trading.
Another option is to just wait to see how things play out.
As excited as we are about cannabis IPO investing, sometimes the market conditions aren’t favorable for a company going public, so we wait to pick our time to strike. Even though we see cannabis stocks as eventually having the potential to be recession-proof, overall bad market conditions can knock prices down.
No one can control trade wars, geopolitical tensions, slowing smartphone sales, or potential fallout from Brexit.
Remember that it’s okay to wait before purchasing a cannabis IPO. When it comes to investing, Warren Buffett compared it to baseball. He said he doesn’t have to swing at every pitch. He can wait for the one that is right for him, and that gives him a better chance of hitting it out of the park.
When it comes to cannabis investing, you only need a few big winners.
Conclusion
Investing in IPOs can be risky. If anyone tells you otherwise, they are lying.
In most cases, you are placing your trust in what a company could do instead of a proven track record of success.
That’s especially true with cannabis companies.
Not only are most cannabis companies new as businesses, they are also operating in an industry that still is illegal under federal law in the United States. While we believe full legalization is a matter of “when” and not “if,” there are still a lot of issues a cannabis company faces compared to a business from a more traditional industry that is going public.
Having said that, investing in the right IPOs can be extremely lucrative.
Not every company from the tech boom was a winner, but just talk to the folks who originally bought Apple or Amazon when they first went public.
There are going to be clear winners and losers, but make no mistake that the future winners will have the ability to create life-changing wealth.
At the Wall Street Watchdogs, we wish you success on your investing journey, and we truly believe you have identified one of the biggest and best industries to invest in!
