Investing in marijuana still a risky business

Tim Fitzsimons Dec 19, 2014
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Investing in marijuana still a risky business

Tim Fitzsimons Dec 19, 2014
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The legal pot industry in America is now worth billions, and it’s growing. Naturally, investors want to get a foot in the door, but the limbo of selling something that’s legal at the state level and illegal at the federal level throws a dash of chaos into the stew of capitalism.

There are plenty of cheap stocks to buy in the booming legal weed industry. But it’s a bad idea, according to Alan Brochstein, founder of 420investor.com“The majority are what are known as pink sheet companies,” Brochstein said. “It’s an extremely risky sector, kind of the wild, wild West. I hate to use the word investing, because it’s really more gambling, trading, speculating.”

A lot of these so-called pot industry stocks are the very same kinds that Jordan Belfort sold in the 2013 movie Wolf of Wall Street. They’re shady enough that the SEC issued an investor warning in May saying many weren’t even real businesses. 

But illegal money is flowing into this industry, so the question is now, “how?”

Troy Dayton, CEO of Arcview group, says “Mark Twain had a great quote, he said, ‘When there’s a gold rush going on, it’s a good time to be in the pick and shovel business.’ And that’s exactly what’s happening now.”

Dayton’s Arcview group helps connect investors with businesses working in the legal marijuana industry with “everything from soil to lighting equipment, to insurance products, to real estate, to software services and delivery apps, you name it … It’s just an absolute boom happening.”

But not quite the gold rush that investors are hoping for.

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