The price of stocks on the international trading markets constantly fluctuate for a variety of reasons. Politics, governmental policies, and economic indicators often have a role to play in the prices of stocks, commodities, bonds, or mutual funds. If you are an observer of the global markets, notice how medical marijuana stocks are rapidly growing in the industry in the United States and Canada. As the cannabis regulations and laws continue to change nationally and globally, more US states and countries are legalizing the sale of medical and recreational marijuana.
Before you make that leap to invest in marijuana companies, there is information and indicators you should learn about. You must observe all indicators before and after the purchase of stocks. Not all cannabis stocks are good investments and could be fraudulent. For example, the SEC recently filed charges against scammers who took nearly $5 million from investors who believed they were purchasing a legitimate interest in a company.
Potential investors must evaluate and investigate all marijuana companies offering stocks on the market. Prepare yourself by studying the history and financial statements of a business to get a visual look at its financial position. If you avoid this process in selecting stocks, you may run across fraudulent investment agents and fictitious companies. Equip yourself with knowledge first to learn what makes a stock fluctuate, and what to watch for before and after you purchase stocks in the pot industry.
How Investors Purchase Stocks
Most stocks in the marijuana industry are trading over the counter, known as OTC. Investors have to be careful and do their research on the risks involved in each stock. Companies offering OTC trading don’t have to meet requirements as publicly-traded companies on the New York Stock Exchange. It makes OTC stocks riskier compared to regulated stocks traded through stock exchanges. One major cause to make a stock risky sold over the counter is the transparency of the company’s financial statements.
The Significance of Financial Statements
Financial statements are tools an investor uses to collect information and monetary data about the stability of a company. Business finance involves reporting profits, net worth, revenue, liabilities, assets, and administrative and overhead expenses. Investors use the data and information found in income, cash flow, and balance sheet statements to determine how efficiently a company is managing and running the business.
The future stability of marijuana investments is important whether stock markets are climbing upward or declining downward. The events that influence investors to sell or purchase shares of stocks are market indicators, including;
- Performance dates of stocks, bonds, and mutual funds belonging to corporations and governments
- Conflicts between countries, such as wars and policies
- Monetary policy
- Governmental fiscal policy
- Devastating weather changes and natural disasters
Reasons for Stock Fluctuation
Supply and demand for marijuana products on the market is the main reason for stocks fluctuating up and down. Investors are the key players in the market. The difference between supply and demand is that supply is the amount of shares investors are seeking to sell and demand is the number of shares a buyer is looking to purchase. Buying and selling stocks impact the prices of trades. For instance, a seller will drop the price to encourage buyers to buy and a buyer will up a bid price to entice sellers to sell the stocks.
How to Investigate Companies Offering Marijuana Stocks
Companies growing, distributing, and selling marijuana products in the United States must get licenses to operate in its jurisdiction. Investors must do thorough research to ensure the company they are investing in is a registered stock. Avoid at all times purchasing stocks through an email, text, or phone call.
Most likely, it is a scam, and the individual is selling fake investment stocks. Be careful of fast-talking and fraudulent schemers out there guaranteeing risk-free and high rate returns on investments. All investment options have associated risks. Just like the investors who were scammed by fraudulent companies and had millions of dollars stolen, this can happen to you.
Future investors, do your research before investing your capital into companies offering stocks in the cannabis industry. Prepare yourself by obtaining knowledge to learn about global markets and why stocks fluctuate. It will help you select reputable companies for investments.