When making a selection, there are always reasons for and against the choice you make. This means that you have to study both of these sides very carefully. Failure to do this, might see you make a decision that is not justified. When deciding on an appropriate investment, most especially, it is important for your choice to be justifiable. This will ensure that all your money does not go down the drain. The cannabis business has become very popular in Canada due to the legalization of medical marijuana High THC. It has seen very many persons invest in cannabis stocks with an aim to make more money. However, as attractive as this may seem, the following are reasons you shouldn’t invest in Canada’s top cannabis stocks:
- Black market existence – even with cannabis’ legalization, the black market is still able to attract a considerable number of customers. This is a disadvantage to the economy in that involved dealers do not pay taxes. Owing to this, their cost of production is lowered meaning that the final cannabis prices are low. This is one feature that makes the black market desirable. It is likely that illegal dealers will find a way to attract customers from the company you invest in. This might mean devaluation of your company stocks over an extended period.
- Possibilities of future regulations – this industry is very sensitive as it deals with offering products that can be harmful to the human body. If, for instance, a lot of harm is identified in the future, restrictive government regulations might be put in place. These may limit the rate at which your company operates thus resulting in reduced profits. If this happens, then the cannabis stocks you invested in might not be as profitable as expected.
- Lack of enough differentiation – for any company to be profitable, it must have the differentiation ability. This means providing something different in comparison to its competitors. For instance, a five star hotel hoping to the best should provide what its competitors are unable to. This will then prompt similar hotels to do the same. As a result of this, healthy competition will be enhanced thus resulting in the industry’s growth. Most cannabis companies offer the same deals to all their customers. This means that a customer may not have enough reasons in terms of why they buy from their legal cannabis dealer. Owing to this, cannabis stocks across the board may be equally priced. This means that your investment in a certain cannabis stock is no different from another person’s
- Demand uncertainty – this is mostly due to the black market’s existence. Most cannabis companies and growers tend to push the product even if they are uncertain of whether or not people will buy. This then results in oversupply of cannabis which then lowers down the price with an aim to attract as many customers as possible.
The most important thing is carrying out a lot of research before investing in anything. You should make a decision based on future expectations of the business to thrive. If you are unable to make the decision on your own, consult an economics’ expert.