Back in 1997, you could buy a share of Amazon stock for around one dollar. Imagine if you bought one thousand of those shares and still owned them today (a share is currently around $2,100, almost a 120,000% increase)! The popularity of marijuana stock comes from the potentials of the industry–everyone's hoping to find a payoff much like early Amazon investors. With US marijuana sales expected to reach 23.4 billion by the year 2022, the market could possibly see exceptional trajectory growth in the stock market.
With recent changes to the legalization of marijuana use in the United States, both medically and recreationally, more people are showing an interest in marijuana stocks. And it's no wonder, considering global spending on legal cannabis worldwide is projected to hit 57 billion in a decade. The legal market is growing like a weed (pun intended) and many people are wondering if investing in marijuana right now could pay off in the future.
Marijuana derives from the cannabis plant, as does hemp. The plant produces cannabinoid chemicals like tetrahydrocannabinol (THC) and cannabidiol (CBD). There are plenty of different companies currently in the pot industry. Before making any decisions on investing in this industry, you should do your research first. When looking into companies dabbling in marijuana, it's important to know what they deal with. Some marijuana stock companies are in the growth and retail industry, such as Canopy Growth Corporation. Others are in the biotech and pharma industry, such as GW Pharmaceuticals, while others are focused on CBD products like Charlotte's Web. Many well-known companies are also looking to become players in the marijuana industry. Anheuser-Busch announced a $50 billion partnership in 2018 with Tilray to research the production of canned beverages that will contain both CBD and THC.
When buying stock in marijuana, you have options. You can buy publicly traded stock yourself through over-the-counter trades (OTC), from a stock exchange available through a licensed broker, or through an exchange-traded fund (ETF) which is a group of funds grouped together into one account. There are pros and cons to each of these buying options.
Choosing an ETF can reduce your risk, since your portfolio is diversified over many different stocks; but on the flip side, you're not as likely to reap any significant benefits if one of the stocks happens to soar. The two most popular weed-based ETFs are the
OTCs, sometimes called penny stocks, are the riskiest buying options simply due to the lack of public information on such new companies, combined with the fact that most of the companies in this stock line are new businesses. The appeal of these types of stocks, however, is their low cost to purchase. For example, cbdMD, a producer of CBD oils, had a stock price at $1.11 per share as of February 23rd. Even though these low stock prices are enticing, it probably would not be wise to put all of your eggs in one basket with any OTC stocks.
Just like any budding industry, the potential gain is great, but the risk could be even greater, and your investments might have the risk of going up in smoke.
Although recreational marijuana is now legal in 11 states and medical marijuana in 33 states, the drug is still illegal on federal terms under the Controlled Substance Act. With marijuana's classification as a Schedule 1 drug under this act, the federal government declares it to be completely illegal, even for medical use– which technically means that investors who put their money in marijuana companies are conspiring to violate that act. If you're an employee of the federal government, it might be best to steer clear of any marijuana stocks–at least until it's legalized on the federal level. For everyday investors, however, the chance of facing criminal charges is pretty low.
Price to Sales Risks
The price to sales ratio is commonly used amongst investors when evaluating stocks. A company's P/S ratio is determined by dividing a company's market capitalization by its revenue (usually over a twelve-month period). It's important to look into the PS ratio for any company you plan on buying stock in, as this figure gives you a better understanding of how much investors are willing to pay per dollar of sales. The key takeaway: the lower the ratio, the more desirable the stock is to purchase.
A look at this P/S ratio chart shows the significantly higher projected P/S ratio in the marijuana stocks compared to other industries. Currently, top-trending marijuana stocks from companies like Cronos Group, Inc., Tilray Inc., and Canopy Growth, Inc. are showing high results for P/S ratio. The good news: P/S ratio is not the be-all-end-all of determining a stock's worth.
Black Market Risks
As much as statistics show growth trends in the legalized sector of marijuana-based sales, black market pot sales are still playing a role in hindering the industry's sales. Even with the complete legalization of marijuana in Canada, for example, statistics still show that nearly half of all cannabis users report buying marijuana from illegal sources.Likewise, according to NBC News, in spite of California legalizing recreational marijuana over two years ago, black market sales still outnumber the legal ones.
Stock dilution occurs when a company issues new stocks, therefore decreasing ownership percentages of current stockholders, and in turn stock prices. Statistics show that many marijuana-related industries have dilution concerns, which can be seen through market cap statistics showing the share price and the number of existing shares. For example, Canopy Growth's five year market cap analysis chart shows a significant increase.
The Bottom Line
It seems that many of the repercussive risks in the legal marijuana industry will change over time, as more and more countries legalize and decriminalize marijuana. With the growing support of its legalization over time, I believe the legal market is here to stay.
Pew Research Center
It's impossible to invest in any stock without taking risks. The best advice for potential pot investors: Don't devote more than you are willing to risk, do your research before buying any particular stocks yourself, and always remember, diversification is key in any good investment strategy!
Whether you are looking for a new job or trying to grow in your current one, getting a certification can be a great way to improve your skills.
Anyone can put that they are proficient in a computer program on their resume but having a certificate can help you stand out amongst the competition and give credence to the strength of your skills.
But what's the best way to invest in yourself without breaking the bank? Some certification programs can cost hundreds if not thousands of dollars. We are going to walk through six of the best certifications you can get for $100 or less.
Who is it best for: Those who work with analyzing and presenting data.
Cost: $100 for Tableau Desktop Specialist; additional certifications are available for a larger fee.
More companies than ever see themselves as data companies. Being able to understand data and use it to guide decisions at your company is often critical to taking on a leadership role. Not to mention, being able to present the data in a clean, attractive, and compelling way can help get buy-in from others in your organization or clients. That's why Tableau is a great tool to have in your toolbox.
Tableau allows you to create interactive visual analytics dashboards. In layman's terms, you can take data; create graphs, maps, or charts; and then allow end-users to interact with these graphics to better understand the information. It's a fantastic tool allowing non-technical users to gain insights for data-driven decision-making.
Tableau Desktop Specialist certification starts at $100 and has no expiration date. There are many videos on Tableau's site to prepare for your exam as well as Tableau Starter Kits allowing you to play around and learn the different capabilities of the program. Tableau offers a 14-day free trial as well as free license for one year for students.
Additional certifications after Desktop Specialist are Desktop Associate and Desktop Professional. Those working with a Tableau server may also be interested in a separate certification as a Server Associate or Server Professional.
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When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.