Analysis originally distributed on February 22, 2017 By: Michael Vodicka of Cannabis Stock Trades
Interest in cannabis stocks is spiking in 2017.
This trend isn’t just on display with higher trading volume. It is also validated by the most powerful search engine in the world: Google.
When I typed marijuana stocks into Google Trends this chart below came up.
As you can see, search volume for marijuana stocks spiked to an all-time high during the election and once again early this year.
Chart courtesy of Google Trends
This is a bullish signal for cannabis stocks.
It tells me additional capital will be flowing into the sector from investors eager to profit from legal cannabis.
Some of these capital inflows will come from experienced investors.
Some of it will come from people investing for the first time.
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It turns out the cannabis industry is attracting a lot of first-time investors.
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I’ve seen that in my wealth management business the Vodicka Group, Inc.
We’ve also seen that at Cannabis Stock Trades – we’ve been hearing from a lot of first-time investors who are excited about the industry.
I can’t say I’m surprised. Legal cannabis is a compelling investment.
However, investing in cannabis stocks can also be tricky.
Both novice and experienced investors need to be cautious. I have learned that first hand.
My clients and I began investing in cannabis stocks four years ago in 2013. Today we own hundreds of thousands of shares and continue to buy more almost every week. Along the way, we’ve had some huge victories. But we’ve also learned some tough lessons.
Hopefully some of my experiences can help you become more profitable.
Here is my list of seven essential tips to help you maximize cannabis stock profits.
7 Insider Tips To Succeed With Cannabis Stocks:
1 – Create Realistic Expectations: The legal cannabis industry is one of the most exciting investments I’ve ever been around in 17 years of trading and investing. Many cannabis stocks have delivered big returns in a short amount of time. For example, Canopy Growth Corp (TSX: WEED.TO) is up 350% in the last 12 months. These outsized returns have expectations running sky high for the cannabis stocks. Although I’m expecting great things from cannabis stocks, don’t get too excited about gains and don’t get too bummed about losses.
2 – Focus on the Long Run: When analyzing an investment, sometimes I use a microscope and other times I use a telescope. For cannabis stocks, I am using my telescope. That means I am looking at this investment from 10,000 feet above. I am expecting plenty of volatility in the short run. But in the long run I am expecting the industry and stocks to steadily move higher for many years. It’s another way of saying don’t sweat short-term volatility.
3 – You Don’t Need to be a Trader to Profit from Cannabis Stocks: There is a tendency for some investors to think that making more trades equals making more profits. That is not true. From my 17 years of experience in trading and investing, more trading usually means less profits. My goal with cannabis stocks is to invest early in future global leaders. This is where the real fortunes are made. This is where I am looking for a “100-bagger” – a stock that doubles 100 times like Microsoft or Apple.
4 – Stay Diversified: Picking winners and losers in the cannabis sector is not easy. Right now, there are more than 250 stocks in the global cannabis sector. From this group, some companies will grow into global leaders. Others will fail and file for bankruptcy. This is why I recommend a diversified portfolio of cannabis stocks. By investing in a group of cannabis stocks you limit your exposure to one individual company struggling or failing.
5 – Don’t Wait for a Big Pullback to Invest: Buying shares near a 52-week high can be intimidating for many investors. But you know what’s even harder? Watching your favorite stock rally to new highs month after month while “waiting for a pullback.” Don’t worry about buying the monthly or even weekly low. As an investor, your best friend is time. Buying lets time start working in your favor. If you buy a good stock and own it for a few years, your original entry price won’t have much of an impact on total return.
6 – Always Use Limit Orders: Cannabis stocks have wider bid-ask spreads than larger companies such as Google and Microsoft. Those wider spreads expose investors to price risk when buying and selling shares. That’s why I recommend always using limit orders for all cannabis trades. Here’s some more information on limit orders.
7 – Optimize Taxes with a Roth IRA: Big profits have one down side. Big taxes. One of the best tax strategies for cannabis stocks is using a ROTH IRA to own these stocks. With the Roth IRA, all investment profits grow tax free. It’s always smart to consult a tax professional to discuss your individual needs.
Hopefully, this provides some additional guidance on investing in cannabis stocks.
Action To Take
The entire cannabis stock sector looks like it’s about to breakout higher into a new 52-week high. If that happens, I am expecting these companies to lead the charge higher.
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Where was the information on limit orders ? There was no link