Click here for a message from The Motley Fool Co-Founders Tom and David Gardner.

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

A hand gripping a marijuana plant

Recreational Pot Sales in Bellwether States Tumble After a COVID-19 Buying Peak

It seems that many users of the drug have stocked up sufficiently to make it through the coronavirus shutdowns.

Two hands holding marijuana leaves

Canopy Growth Names 2 New Board Members

The pair are seasoned executives with years of experience in Canadian companies.

New York City at night

New York's Governor Says Recreational Pot Legalization Doubtful in 2020

The admission is a sharp turn from Andrew Cuomo's stated ambition at the beginning of this year.

Hands holding two marijuana leaves

Better Buy: OrganiGram Holdings vs. Canopy Growth

Which stock wins in this cannabis version of David vs. Goliath?

Marijuana buds atop a collection of US currency

Tilray Releases 11 Million Shares From Lock-Up

The shares could theoretically be sold on the market starting this Friday.

Cannabis derivative and plant

Illinois Extends Application Deadline for Recreational Cannabis Business Licenses

Would-be applicants now have until April 30.

Marijuana with cash Getty Images-marijuana-leaf-on-top-of-stack-of-100-bills

Stock Market Wrap-Up: Coronavirus Masks Lift Honeywell; Cronos Leads Marijuana Stocks Lower

Stocks dropped Tuesday on fears about the growing pandemic.

cannabis greenhouse

Top Cannabis Stocks Under $5

Pot stocks have been flying of late, but these three stocks are still not that expensive.

3 cannabis leaves

3 Surprises in Cronos Group's Delayed Q4 Earnings Update

Many investors probably didn't see these things coming for the Canadian cannabis producer.


Cronos Group Inc. (CRON) Q4 2019 Earnings Call Transcript

CRON earnings call for the period ending December 31, 2019.

Marijuana leaf atop a 100 dollar bill

Cronos Group Stock Rises Cautiously on Q4 EPS Beat, Revenue Miss

There's a very large caveat to that positive bottom-line number, though.

Marijuana bud with Canadian flag in the background

HEXO Shares Slump 27% on Second-Quarter Results

Impairment charges left the cannabis company's bottom line well in the red.


HEXO Corp. (HEXO) Q2 2020 Earnings Call Transcript

HEXO earnings call for the period ending January 31, 2020.

Shadow of maple leaf on a pile of cannabis leaves

The 3 Most Important Numbers in HEXO's Horrible Q2 Results

HEXO reported two really problematic metrics and one encouraging result in its Q2 update.

Marijuana leaf with stethoscope

Weekly Cannabis Stock News: Coronavirus Recovery?

U.S. marijuana companies won't be getting any relief from the government's coronavirus recovery stimulus bill, but the story might be quite different in Canada.

Cannabis Flower Up Close Pot Weed Marijuana Grow Farm THC Getty

These 5 Pot Stocks Are Up Over 100% in a Week, but Only 1 Is Worth Buying

Cannabis stocks have breathed new life, but most are worth avoiding.

Financial Newspaper Graph Showing Gains Getty

You Won't Regret Adding $250 to These 4 Stocks Right Now

Even small investments can yield big rewards over time.

Flowering Marijuana Plant Cannabis Pot Weed Grow Getty

5 Pot Stocks That Can Survive the Coronavirus Crash

These marijuana stocks have the tools to outlast the COVID-19 pandemic.

Reichstag in Berlin Germany

Insurance Reimbursements for Medical Pot in Germany Rise 67% in 2019

These were fueled by a 44% rise in the number of prescriptions.

Marijuana products being tested

Report: Canadian Government Formally Solicits Pot Industry's Help With Coronavirus Testing

The country's Health Canada has sent an email solicitation to top cannabis companies asking for the use of lab facilities for testing.