Since we published our first article on cannabis investing back in January of 2016, we’ve been simply floored by the overwhelming interest from the general public in “how to buy marijuana stocks”. Seriously, that’s the question that we get asked almost daily now. How can I buy marijuana stocks? The short answer is, you need to open up a brokerage account. The long answer is, what in Zeus’s name are you thinking? We’ve highlighted before the dangers of investing in over-the-counter (OTC) stocks and of the 57 marijuana stocks we identified, over 60% trade as OTC stocks. As a first time investor, do you really want to take the plunge with your hard-earned dollars and invest in one of the riskiest and most volatile investment themes there is? As our article on 57 marijuana stocks approaches 20,000 likes, it seems like you sure do. Don’t worry. You’re in safe hands.
How to Buy Marijuana Stocks
First, let’s talk about how you actually buy marijuana stocks, or any stocks for that matter. The first thing you need to do is open a brokerage account. Here are the brokerage firms we recommend:
- Open a Motif Investing account – You won’t be able to buy any OTC stocks or any stocks traded on foreign exchanges. Of the 57 marijuana stocks we listed, you’ll only be able to buy the ones that trade on major stock exchanges. This will cost you $4.95 a trade but you can also buy baskets of stocks like we described in this article on buying legitimate medical marijuana stocks. Click here to open a Motif Investing account with no deposit required.
- Open an Ally Invest account – One of the cheapest brokers out there is Ally Invest. You can open an account with just $1 dollar deposit and trades are only $4.95 a pop. You can buy stocks on the over-the-counter (OTC) market in addition to stocks on major U.S. exchanges. You won’t be able to buy any stocks that trade on Canadian exchanges. click here to open a and Ally Invest account.
- Open an Interactive Brokers account – This is the ultimate choice for serious retail investors but they require a $10,000 U.S. minimum deposit to open an account. You can buy Canadian dollars and then buy any Canadian stock on the Canadian exchanges they trade on. Trades run about $1 a pop. Click here to open an Interactive Brokers account.
After you’ve opened one of these brokerage accounts, we need to move on to stock selection.
Which Marijuana Stocks Should I Buy?
Now that you’ve opened a brokerage account, your next question should be “which marijuana stocks do I buy”? We’re not going to tell you the answer because we don’t know. As we type this, we own zero shares in any marijuana stock. We are also not short any marijuana stocks. We just value our hard-earned money too much to speculate in this space. If someone twisted our arms, we’d buy some of the big Canadian growers. If we truly want to invest in the cannabis theme, we’ll pony up the money needed to invest with one of the 11 VC Firms that are Investing in Cannabis. What we would never ever ever do is buy an OTC stock (that is not an ADR) with the intention of holding it long term as an investor. In 99% of all cases, your money will go up in smoke. We know much better ways to make our money go up in smoke.
Which Marijuana Stocks are Good?
Since we’re not going to tell you what stocks to invest in, you’re going to have to do some digging of your own. You don’t need to have a degree in finance, just some common sense. When you go to your dealer to pick up an eight of skunk, you never front him the money. You have him procure the sack first. You smell it, squeeze it, feel it, and eyeball it to make sure it’s an eighth. If he brings you Mexican brick weed, if the sack looks light, if the buds don’t look right, you don’t buy it.
That’s kind of how we go about evaluating stocks. We don’t just buy stocks and ask questions later. We first have a good look around. For every stock you are researching, don’t even bother going to their website. Instead, go right to their regulatory filings located online. For U.S. stocks, go to the SEC Online Filing website. For Canadian stocks, go to SEDAR. Open up the most recent quarterly earnings report. Now read our article on warning signs to look out for in OTC stocks and see if any of these red flags exist in their filing. Having a tough time? Sign up for the Nanalyze newsletter and we’ll walk you through how to do this in a future article.
What You Should Do Right Now
Now that we’ve told you how to buy marijuana stocks, we’d recommend that you don’t buy any marijuana stocks until you’ve done the following: Take 80% of the money you were planning on spending on marijuana stocks and invest it in the Vanguard Total Stock Market ETF (trades under the ticker VTI). This is an ETF that represents a basket of all stocks that trade in the U.S. Alternatively, you can invest that same money in the Betterment robo advisor platform. That is the safest and lowest cost way to invest in your future. Put some money into that account every single month. If you can afford to buy an eighth of chronic every week at $50 bones a sack, you can afford to put $50 into your Betterment account. Only after you’ve made that commitment to your future should you open up a brokerage account and invest in marijuana stocks. You’ll thank us for it.
Looking to buy shares in companies before they IPO? A company called Motif Investing lets you buy pre-IPO shares in companies that are led by JP Morgan. You can open an account with Motif with no deposit required so that you are ready to buy pre-IPO shares when they are offered.