With the increase of the legalization of medical marijuana and recreational marijuana throughout the United States, there’s also been a major increase in the number of people investing in marijuana stocks.

Marijuana stocks are relatively new, and, while some people are going all-in on them, plenty of others are a little hesitant to invest in such a new market.

If you fall into the latter category, you may want to consider investing in marijuana penny stocks. 

Read on to learn more about them, their benefits, and how you can start investing in them today.

What are Marijuana Penny Stocks?

A penny stock is a very low-priced stock. The term penny stock used to refer to any stock that cost less than one dollar. Now, the term applies to a stock that costs less than five dollars. 

Penny stocks are highly volatile — there’s a high level of reward, but there’s also a high level of risk.

Marijuana penny stocks — sometimes referred to as penny pot stocks — are penny stocks in businesses that are part of the cannabis industry. 

Many marijuana penny stocks are in medical marijuana companies or research companies. 

Why Invest in These Stocks?

There are lots of benefits that come with investing in marijuana penny stocks. The following are some of the greatest reasons to consider this type of investment:

Lots of Potential

The marijuana market is booming both in the United States and abroad. With so many new cannabis-focused businesses opening their doors throughout the world, now is the perfect time to get in on the ground floor.

High Utility

There are dozens of different uses for marijuana, and new businesses are rolling out every day advertising a new benefit or way to incorporate it into your routine. Because of this, it seems unlikely that marijuana will be going anywhere anytime soon.

Recession-Proof

Nothing is 100 percent recession-proof, but many people are arguing that marijuana is pretty darn close. It’s too early to tell for sure, but marijuana appears to be on its way to becoming a consumer staple. As a result, it seems that it will always hold some kind of value no matter how the market fluctuates.

How to Start Investing

Okay, you’re convinced that it might be a good idea to start investing in marijuana penny stocks. How do you get started, though?

Here are some guidelines that will help you be a smart investor and reap the rewards of marijuana investment:

Research, Research, Research

When you’re looking to invest in any kind of company, including cannabis companies, the first thing you need to do is research.

Look into all the different companies in which you can invest. Consider their Securities and Exchange Commission (SEC) filings, whether or not this company has been in the news recently, and how its stocks have performed recently.

When you’re looking into marijuana penny stocks, it’s also a good idea to search for high-volume stocks. If there aren’t a lot of shares in play, you might not be able to sell the stocks quickly. This, in turn, limits the amount of control you have over your losses. 

Avoid Scams

There are a lot of scammers out there trying to make money off of folks who are eager to invest in the marijuana market.

While you’re researching pay attention to alerts that the SEC has issued regarding certain marijuana stocks. You may want to look into online message boards, too, to see what people are saying about a particular stock.

Choose a Wise Investment Amount

No matter what kind of business you’re investing in, this rule applies: do not invest more than you are willing to lose.

Penny stocks are good for this because you do not have to spend a lot of money when you’re buying the stocks. But, because they’re also highly volatile, you need to be prepared for the possibility that you could lose some money.

Thus, you need to be wise about how much money you spend, especially when you’re working with any kind of marijuana stock.

It doesn’t matter how confident you are in a particular stock — the market might not agree with you.

Determine a Timeline

When you’re investing in marijuana penny stocks, you need to be prepared for some potential losses. You also need to prepare for the possibility that you’ll need to sell your stock and move on.

This can be hard to do — it’s hard on the ego when an investment doesn’t pay off. It can be even riskier to hang on to these stocks for too long, though.

Give yourself a limit for when you’ll sell your stocks. For example, if it falls below a certain value or rises above a certain value, you’ll sell, no matter what.

Purchase Stocks Through a Broker

Now, it’s time to get ready to buy your stocks. Work with a broker to do this. They can give you advice on the best stocks to purchase and help you through the buying and selling process.

You can work with a brick-and-mortar broker or an online broker. Both are good options as long as you do your research and choose a trustworthy firm.

Sell the Stocks

When you’ve generated enough returns from your stocks and have reached the limits you set for yourself, it’s time to sell. You can sell through a market order or a limit order. 

A market order executes at the present market price. A limit order executes only if the price falls at or below are set limit price.

Once you’ve sold the stock, you can use the proceeds to spend or reinvest — the choice is yours.

Looking for More Investment Advice?

Now that you know more about marijuana penny stocks, are you interested in investing in them?

If so, be sure to follow these guidelines so you can make wise investments that will yield the greatest returns.

Are you interested in learning more about investment? Whether you’re interested in penny stocks or other types of investments, we’ve got resources for you.

Check out the Business/Finance section of our website today. You’ll find all kinds of helpful information here that will help you become an investment pro. 

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