Are mar­i­juana stocks for you?

The Daily Courier - - BUSINESS - BRETT MIL­LARD

Ihave been asked about in­vest­ing in mar­i­juana stocks a few times re­cently by peo­ple who have shown no pre­vi­ous in­ter­est in the mar­kets or the in­vest­ment world.

It would ap­pear I am not the only ad­viser field­ing th­ese queries ei­ther.

Many peo­ple who don’t pre­tend to know any­thing about the stock mar­kets or in­vest­ing are sud­denly tak­ing in­ter­est in the shares of Cana­dian cannabis com­pa­nies as they re­peat­edly make front-page and prime-time news head­lines.

In­vestors have been flock­ing to this hot sec­tor lately and many have been mak­ing quick money on their trades.

Shares of com­pa­nies such as Aurora Cannabis Inc., which have dou­bled in value in the past three months, are climb­ing rapidly while in­vestors spec­u­late on the fu­ture growth prospects.

As the var­i­ous provinces roll out their recre­ational mar­i­juana plans, the on­go­ing news sto­ries are con­tin­u­ing to fuel this spec­u­la­tion and many in­vestors can imag­ine noth­ing other than con­tin­ued growth of th­ese stock prices. How could they pos­si­bly go down right? The last time we saw a sec­tor-spe­cific buy­ing frenzy like this was dur­ing the dot-com bub­ble in the early-2000s.

Dur­ing this pe­riod, we saw ex­ces­sive spec­u­la­tion of in­ter­net-based stocks and ev­ery­one from your hair­dresser to your babysit­ter seemed to be of­fer­ing stock tips. What hap­pened af­ter is well known. Dur­ing the col­lapse, many com­pa­nies lost a sig­nif­i­cant por­tion of their mar­ket cap­i­tal­iza­tion and many oth­ers failed com­pletely and shut down.

Will the cannabis sec­tor suf­fer the same fate?

Most likely, a few com­pa­nies will sur­vive and carry on with busi­ness, but many star­tups will dis­ap­pear as quickly as they came onto the scene.

There won’t likely be a mas­sive in­crease in the num­ber of mar­i­juana users and the in­dus­try won’t take over so­ci­ety in the same way that the in­ter­net and tech­nol­ogy has done.

So, should you be in­vest­ing in cannabis stocks?

Let’s con­sider the above ex­am­ple of Aurora Cannabis Inc.’s stock.

If you had put $1,000 into the stock at the start of the year you would have roughly dou­bled your money and have $2,000 to­day.

The risk of that trade was very high and much like flip­ping a coin.

You could have just as eas­ily lost your orig­i­nal $1,000.

And if you con­tinue to hold that stock in­stead of sell­ing it to­mor­row morn­ing, it may still be worth noth­ing.

Do you know where else you could in­vest $1,000 and dou­ble your money with sim­i­lar risk? The roulette ta­ble at the casino. You see, if you went there last night and put $1,000 on red and won, you would also have $2,000 in your pocket to­day.

Hope­fully you would take your win­nings and walk away in­stead of dou­bling down and hop­ing that red comes up again.

If you do, you’d be mak­ing bet­ter in­vest­ing de­ci­sions that con­tin­u­ing to hold the cannabis stocks.

If you time things just right, you can no doubt make a lot of money in cannabis stocks.

But ,without a crys­tal ball, that is very hard to do.

So, if you do de­cide to in­vest in them, just be sure to only in­vest what you’re will­ing to lose and make sure you fully un­der­stand the risks you’re tak­ing with your hard earned sav­ings.

You also risk to your re­tire­ment dreams, if you lose it all.

Brett Mil­lard is the owner of SPEIR Wealth Man­age­ment in Kelowna. Reach him at brett@speir­

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