Five Ways to Weed Out a Bad Pot Investment

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Come on, all the cool kids are doing it. With names like Joe Montana and Snoop Dogg jumping on the bandwagon, cannabis (marijuana) isn’t just something for those late night frat parties anymore. Welcome marijuana into the mainstream, where it’s easier than ever to invest in cannabis companies through an exchange, commingled fund or private venture interest. Before you get hooked though, advisors should know the five ways to sniff out the stench of a bad cannabis investment.

There are more options than ever before for advisors to invest in cannabis. With the first ever cannabis ETF launched on the Toronto exchange last year, there are rumors that the U.S. is going to follow suit – but this remains to be seen.

For U.S. advisors, the easiest way to get exposure to the cannabis trend is by investing directly in companies who either 1) produce equipment or goods that support marijuana cultivation; or 2) biotech stocks that develop cannabinoid drugs; or 3) companies distributing the drug directly. Generally, cannabis-related stocks trade in the OTC market.

Whether you’re investing in cannabis directly on a company-by-company basis or using some of the many commingled investment vehicles available, advisors need to know the right questions to ask in their due-diligence process.