Click here for The Motley Fool's resources on Coronavirus and the market.

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

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.

Colorado road sign with marijuana leaf

Medical Pot Dispensaries Exempt From New Colorado Stay-at-Home Order

Medical marijuana stores fall under the category of "critical businesses," as defined in the order.

cannabis marijuana store sign

2 Stocks That Could Double Your Money

There are some great deals out there today.

Marijuana Cannabis Pot Weed Trimmed Buds Atop Cash Bills Money Getty

Sorry, Folks: No Free Money for the Cannabis Industry

Marijuana stocks won't be seeing a dime from the $2 trillion coronavirus stimulus bill.

shadow of a dollar sign over cannabis leaves

Why Green Thumb Industries' Marijuana Sales Soared in Q4

But the news wasn't as great for the U.S. cannabis operator's bottom line.


Is Canopy Growth Stock a Buy?

This marijuana stock is cheaper than it has been in a long time, but the market is also more volatile.

Gavel with marijuana leaf

Maine Is Sued in Federal Court Over Its Recreational Pot Residency Requirement

The court action by private companies aims to allow dispensaries with out-of-state ownership to operate in Maine.

MJ leaf GettyImages-503076890

Have Marijuana Investors Just Given Up?

Even on a good day for the market, cannabis stocks didn't show much optimism.

Marijuana products being tested

Canadian Pot Companies Donate Masks, Materials to Coronavirus Fight

Canopy Growth and HEXO, to name two, are contributing to the battle.

Close up of 100 dollar bill with marijuana leaf atop it

Curaleaf Posts 22% Revenue Gain in Q4, Announces Acquisition

The company's bottom line loss was deeper than expected, however.

Canadian paper currency

Canadian Cannabis Companies Ask to Be Included in Ottawa's Coronavirus Aid Package

More than 70 companies and organizations involved in the nascent industry have sent an official letter to Canadian officials.

Cannabis bag

3 Reasons Cannabis Stocks Are a Buy Right Now

Despite getting hammered in recent weeks, cannabis stocks are better bets than you might think.


Should You Avoid Pot Stocks Altogether During the Coronavirus Bear Market?

Things aren't looking good for the cannabis sector. Should you get out while you still can?

Gloved hand holding marijuana leaf in front of Canadian flag

Report: Ontario Dispensaries to Remain Open During Coronavirus-Related Business Shutdown

The exception could be a boon for marijuana companies like Canopy Growth.

Marijuana dispensary sign

Fighting Coronavirus, a Key Canadian Province Now Allows Pot Dispensaries to Accept Online Recreational Orders

British Columbia marijuana users will still have to pick up and pay for their goods in-store, however.

cannabis plant

Ghana Legalizes Cannabis -- but Only the Hemp Variety

The new law comes with a tight cap on the level of THC allowable in the plants.


OrganiGram Starts Temporary Layoffs in Light of the Coronavirus Pandemic

The cannabis company is reducing its operations to help slow the spread of the disease.

cannabis green light

Is This the Next Big Cannabis IPO?

Bruce Linton isn't staying away from the pot industry.