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If you're looking to strike it rich with pot stocks, you need some patience.
The industry – while showing huge growth potential – is still limited in what it offers investors.
"Barring probably a couple of exceptions, the publicly traded space is probably one to avoid at this point," 4Front Ventures Co-Founder and Managing Partner Kris Krane told Money Morning. "It's just too volatile. There are too many shell games and reverse merger games, and it's not a great space to look at right now."
There just aren't a lot of legitimate investments in what is largely an over-the-counter market for pot stocks.
"Unless you are a pump-and-dump scammer, in which case you probably can make a good amount of money in the public markets in marijuana, it's probably best to avoid it at the moment," Krane added.
That's not to say pot stocks will never be a good investment, or that the industry is to be forever relegated to a playground for speculators and scammers. It just means that for now, you're better off sitting on the sidelines and waiting for a real player to emerge instead of taking your chances with risky bets.
There were a number of marijuana stocks that got a jolt last March when Washington first issued licenses to legal marijuana vendors in the wake of a public vote that made recreational use of the plant legal.
Cannabusiness Group Inc. (OTCMKTS: CBGI) soared as much as 1,600% on the month. GrowLife Inc. (OTCMKTS: PHOT) stock gained 111.8%.
All of that was short-lived hype.
Almost all of the pot penny stocks that spiked that March crashed shortly thereafter. And starting in spring, the U.S. Securities and Exchange Commission began getting suspicious. By summer, eight marijuana stocks had trading suspended.
But don't let that sour you forever on what could very well be a profitable industry in the years to come.
Here's the story behind pot stocks, and how you can make the most of what could be a $35 billion industry come 2020…