Marijuana Stocks

Should you put your hard-earned money into marijuana stocks? We detail the investment opportunities, risks, and regulations in the cannabis space.

The marijuana industry is expected to triple in the next five years -- and many investors are looking to profit.

As states and entire countries decriminalize or legalize cannabis and/or its components, there are loads of opportunities for entrepreneurs and existing companies.

But as in any nascent industry, there are also loads of risks and bad actors. Whether you're a first-time investor or a seasoned veteran, it pays to understand all of the moving parts.

This guide will get you up to speed quickly.

How to Invest in Marijuana Stocks

Follow these seven steps if you're thinking about buying cannabis stocks. The following is a summary, but we encourage you to read the entire article linked below for all the details.

1. Understand the types of marijuana products.

  • There are two types of cannabis products: medical marijuana vs. recreational marijuana.
  • Cannabidiol (CBD) is a cannabinoid that is different than the psychoactive delta-9 tetrahydrocannabinol (THC).

2. Know the different types of marijuana stocks.

  • Marijuana growers like Canopy Growth Corporation (NYSE:CGC)
  • Cannabis-focused biotechs like GW Pharmaceuticals (NASDAQ:GWPH)
  • Providers of supporting products and services like Scotts Miracle-Gro (NYSE:SMG)

3. Understand the risks of investing in marijuana stocks.

  • Legal and political risks
  • Supply/demand imbalances
  • Risk in those that are over-the-counter stocks

4. Know what to look for in a marijuana stock.

  • Normal stock considerations, including:
    • Management team
    • Growth strategy
    • Competitive position
    • Financials (ideally either profitability or strong balance sheet)
  • Cannabis production costs
    • "All-in" cost of sales per gram
    • Cash cost per gram
  • For Canadian companies, the extent of international operations and distribution
  • Dilution risks via warrants and convertible securities

5. Evaluate the top marijuana stocks and exchange-traded funds (ETFs).

6. Invest carefully.

  • For many, avoiding individual investments in the marijuana space entirely is the right call.
  • For those who buy in, keeping your marijuana exposure to a small percentage of your overall portfolio limits your risk.
  • Pure plays are riskier than more diversified plays.

7. Monitor changing industry dynamics closely.

  • Laws, regulations, competitive forces, and the business strategies of the companies themselves will all change rapidly over time.

Read more: How to Invest in Marijuana Stocks (Note: includes a list of every major marijuana stock)

But, Really, Should I Buy Marijuana Stocks?

We just went step-by-step through how to invest in cannabis, but just because there's a trendy new sector with lots of press and potential growth doesn't mean you need to put your hard-earned money in it. After all, if you buy broad index funds, you're covered no matter what sector of the stock market does well.

Think through the pros and cons as you read on: Should You Invest in Marijuana Stocks?

Marijuana Legalization in the U.S.: The History and the Future

One of the biggest variables in cannabis investing is to what extent marijuana will be decriminalized or legalized within the United States, both on a state-by-state basis and on a federal basis.

The link below provides a quick spin through what we've seen so far, from decriminalization efforts starting in 1973 to legalization efforts beginning in earnest in 1996 to the political signs of where we seem to be heading.

Read on: Timeline for Marijuana Legalization in the United States: How the Dominoes Are Falling

More Information on Canadian Marijuana Stocks

There's been tremendous interest in Canadian cannabis stocks, because on October 17, 2018, recreational use of marijuana became legal in Canada (it had been legalized on a medical basis since 2001).

Beyond consumption by Canadians, the upside thesis involves operations or distribution to other countries that have legalized or may legalize marijuana to various extents. This includes Germany and particularly the large market on Canada's southern border.

Read on: Everything You Need to Know About Investing in Canadian Marijuana Stocks

Commonly Confused Cannabis Terms

One of the difficulties in understanding the marijuana industry is the jargon. Fortunately, it's not too complicated once you get a handle on a few main terms.

Marijuana vs. cannabis

Cannabis is the scientific name of the plant (the genus that houses three species). For an investor's purposes, marijuana is synonymous with cannabis, as are more informal nicknames like pot, weed, ganja, dope, grass, 420, sticky icky, etc.


Cannabis is made up of nearly 500 chemical constituents, including many dozens of cannabinoids (substances that act on the body's cannabinoid receptors).

The two most commercially relevant of these cannabinoids are delta-9 tetrahydrocannabinol (THC) and cannabidiol (CBD). Only THC is psychoactive (i.e., makes you high).


Hemp is a strain of a species of cannabis with relatively low levels of THC and relatively high levels of CBD. It has many industrial uses like providing fibers to make rope and clothing.

Recent articles

Cannabis Flower Up Close Pot Weed Marijuana Grow Farm THC Getty

Marijuana Stock Bubble 2.0 Is Here

We've seen this story before, and it didn't end well for pot stock investors on the first go-round.

Stack of One Hundred Dollar Bills Cash Money Invest Retire Getty

5 Stocks That Turned $250,000 Into $1 Million (or More) in 1 Month

These momentum stocks have been printing money for retail investors in recent weeks.


Should You Sell Aurora Cannabis Stock?

One analyst says the marijuana company's investors could incur brutal losses.


Why Aurora Cannabis, OrganiGram Holdings, and HEXO Dropped, Then Bounced Friday

Volatility continues in cannabis stocks as quarterly earnings begin to filter in.


Aurora Cannabis Inc. (ACB) Q2 2021 Earnings Call Transcript

ACB earnings call for the period ending December 31, 2020.

magnifying glass

Will There Be More M&A for the Cannabis Industry in 2021?

The sector is hot again on the heels of two large deals.

Bitcoin symbol in a trashcan

Forget Bitcoin: This Cannabis Stock Is a Better Buy

There are several reasons why.

Gloved hand holding marijuana leaf in front of Canadian flag

Aurora Cannabis Pops After Hours on Second-Quarter Results

The company showed encouraging growth in the stronger of its two main product categories.

Cannabis stocks - GettyImages-1174472394

Why Aurora Cannabis, Aphria, Cronos Group, and Other Marijuana Stocks Crashed Today

Traders are bailing out of pot stocks. But should they be?


Could Canopy Growth Be a Millionaire-Maker Stock?

This Canadian marijuana grower is getting ready for an ambitious turnaround. Can it make investors rich again?

Plants in a hydroponics system.

1 Pot Stock I'm Not Selling Even in a Market Crash

Scotts Miracle-Gro is creeping up in value, but it's still a reasonably priced pick with tremendous growth potential.

A hand gripping a marijuana plant

Why Marijuana Stocks Like Aphria and Charlotte's Web Holdings Flew High Today

It looks like members of a certain investing group are placing big bets on weed stocks.

Stock chart going up with marijuana leaves growing out of each peak

Why Canopy Growth, Aurora Cannabis, and Hexo Stocks Are Still Flying High

Analysts seem confused about whether Canopy's Q3 earnings were good or bad.

Marijuana in bottle GettyImages-913582510

Aphria Is Becoming the Stock Market's Biggest Merger Arbitrage Play

Stocks were volatile on Wednesday, with the marijuana industry once again taking center stage.


Here's Why Tilray Stock Rose Again Today

News of business expansion and optimism on several fronts has sent shares soaring this year.

magnifying glass stock chart getty

3 Hot Stocks to Watch In February

These three fast-going stocks are raising temperatures even during the depths of winter.

cannabis canada map

Aurora's CEO Makes a Gloomy Prediction for the U.S. Pot Market

He's not nearly as bullish on legalization as some people are.

cannabis plant 2

This Move Could Make Cronos the Hottest Pot Stock of 2021

And it could change the way producers make cannabis.

Magnifying Glass on Coins Newspaper Stocks Getty

Forget Sundial Growers: These Penny Stocks Are Much Better Buys

The blazing-hot Sundial can't hold a candle to these far superior companies.

Cannabis on desk at doctors office

Tilray Strikes Deal to Export Medical Marijuana to the U.K.

The company's organic medicine should become available within weeks.