While more and more states are moving toward either permitting medical marijuana or the outright legalization, the drug is still illegal under federal law. Despite states softening their marijuana laws, the U.S. government recently reaffirmed its classification of marijuana as a Schedule 1 drug. So-called “hard drugs” like heroin and LSD are also classified as schedule 1 drugs.
Further complicating things is that about half of the states have varying degrees of legality, while other are have passed less-strict laws but have yet to implement them. It’s a confusing patchwork of guidelines, but the one thing that can’t be denied is that marijuana can potentially be lucrative for investors.
No matter how you look at it, the trends show that more people are getting access to marijuana — especially of the medical variety. There are more than 1.2 million legal medical marijuana patients in the U.S.
Recreational use amongst teens is also popular, which is why opponents aren’t rushing to legalize the drug. A recent study found that 58.2% of 12th graders have used marijuana in the past year, and there are serious concerns about the addiction and other health risks.
Despite that rise in marijuana’s popularity, the merits of investing in medical marijuana aren’t so clear-cut from a financial and perhaps even moral standpoint. Here’s what you need to know.
Avoid the Penny Stocks
When legalization in some states started becoming a possibility, a slew of marijuana-related penny stocks popped up. As a rule, serious investors should always avoid penny stocks. There’s a lack of transparency that makes investing in them a total crapshoot. At their worst, penny stocks can be scams. Even if they’re not, odds are you’ll lose lots of money through these stocks.
Want some examples of how badly things can go?
A few of these marijuana-related penny stocks have soared to incredible heights, turning some people into suburban millionaires, before crashing down. They rise and fall at the drop of the hat, which is a big warning sign to stay away.
Big Pharma Gets in on the Action
A 2016 survey shows that 61% of Americans believe marijuana should be legalized. Lawmakers are responding to this shifting in public opinion, with medical marijuana increasingly becoming legal throughout the US. Full legalization is still a long way off for many states.
With medical marijuana being legitimized both by the public and by state laws, big pharmaceutical companies are slowly getting in on the action. While traditional pharmaceutical companies have long opposed medical marijuana, it’s at the point now where they’ll lose a lot of money if they’re caught completely flat-footed.
For investors hoping to invest in legitimate companies utilizing marijuana and not dodgy penny stocks, some big pharmaceutical companies are promising.
A Moral Question
With companies looking to make money both from medical marijuana and recreational products, there are some more considerations to make. First, the scientific evidence on the benefits of medical marijuana is often uncertain. Marijuana can also be abused as the global number of illicit drug takers is steadily on the rise.
For some investors, those are considerations to make that could be just as meaningful as a company’s financials.
Photo Credit: iMarijuana.com