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Cannabis stocks jumped in late April after the Biden Administration announced its intention to reclassify cannabis as a less dangerous drug.
This change would remove marijuana from the same category of drugs as heroin and crack cocaine, and instead, put it alongside things like codeine and testosterone.
The news caused a few price spikes in the cannabis market. Most notably, the AdvisorShares Pure US Cannabis ETF (an exchange-traded fund that tracks a number of American growers), jumped 25% after the announcement.
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Overall, this change is great news for cannabis enthusiasts across the United States. However, this unexpected bump in stock prices doesn’t change the fact that investing in cannabis is just as volatile as ever.
Not to mention that this change isn’t written in stone yet. First, the White House will need to review the proposal, and then the public will get to weigh in on the potential change. And if Donald Trump wins the upcoming election, he may very well rescind the change before it can happen.
Navigating cannabis stocks
If the reclassification does go through, this will signal a level of legitimacy that the cannabis industry has yet to secure in the U.S., similar to how the Canadian market changed almost overnight, post-decriminalization and eventual legalization.
And yet, this won’t fix the other issues that exist within the cannabis market, which make it relatively unstable and difficult to trust as an investment.
As long as cannabis remains illegal at the federal level, it will continue to cause issues for growers. Things like the inability to trade over state lines, and the challenges growers face getting banks to act as custodians for their U.S. market shares haven’t gone away.
Stocks may have rallied in 2024, but historically, they’ve been a poor choice for long-term investors. Case in point: the AdvisorShares Pure US Cannabis ETF (MSOS is down a whopping 81% since its inception in 2020.
Here are a few things to consider before you make any decisions.
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Alternatives to the stock market
Not a fan of the fluctuating market? Don’t have a risk appetite?
There are plenty of other great investment opportunities outside of the stock market, which you can leverage to help protect your portfolio against ongoing inflation. Here are three alternative assets worth taking a look at:
Precious metals
Because gold has historically remained a relatively stable investment through rocky economic times, many investors choose to invest in gold to protect and grow their savings over time; rather than invest in fluctuating markets (like cannabis), which can be much riskier.
Precious metals tend to have inflation-hedging properties unmatched by even the USD. Investor enthusiasm has indeed propelled the price of gold to record levels, with the precious metal recently surging past the $2,300 per ounce mark.
There are many ways to gain exposure to gold and silver. You can own bullion, buy shares of precious metals mining companies or ETFs, or even consider a Gold IRA
With an A+ rating from the Better Business Bureau, American Hartford Gold has helped thousands of clients protect their retirement with a gold IRA.
This retirement account can help you stabilize your finances by allowing you to invest directly in physical precious metals rather than stocks and bonds.
Fine Art
Fine art has long been touted as a solid inflation hedge. Why? Because, like a fine wine, a piece of fine art tends to get better — and more valuable — with time. But historically, this asset was only accessible to the ultra-wealthy.
Now, Masterworks offers a way for everyday investors to add blue-chip artwork to their portfolios.
Their popular online investing platform allows you to buy and sell shares of fine art pieces so you no longer have to be a millionaire to invest in paintings by iconic artists like Banksy and Basquiat.
The fact that less than 3% of artwork passes their diligence process — along with the potential for strong long-term capital appreciation and the generally low loss rates — makes signing up with Masterworks an easy alternative investment opportunity for those looking to diversify their portfolio and grow their savings outside of the stock market.
Real estate
Many investors covet real estate because it has historically appreciated in value and can help balance a portfolio otherwise made up of stocks and bonds.
Arrived real estate investments make it easy for anyone to explore this inflation-hedging asset class without having to buy property or take on the work of being a landlord.
Backed by world-class investors like Jeff Bezos, the easy-to-use platform offers SEC-qualified investments such as rental homes and vacation rentals.
You can browse a curated selection of homes, vetted for their appreciation and income potential. Once you find a property you like, choose the number of shares you want to buy.
Arrived is making it easy to fit rental properties into your investment portfolio regardless of your income. Join 600,000 registered investors and get started with as little as $100.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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