How to Invest in Cannabis Stocks?

Investing in cannabis stocks requires a few more steps than buying typical equities because most US plant-touching companies trade on OTC Markets rather than major exchanges like NASDAQ or NYSE. Here is a step-by-step guide to getting started.

First, you need a brokerage account that supports OTC trading. Major brokerages like Fidelity, Charles Schwab, and Interactive Brokers all allow OTC stock purchases, though some may charge higher commissions for OTC trades. Robinhood and some other app-based brokers have limited or no OTC support, so check your broker's capabilities before opening an account specifically for cannabis investing.

Once your account is funded, you can purchase shares of US MSOs (multi-state operators) that trade on OTC Markets under tickers like GTBIF (Green Thumb), TCNNF (Trulieve), and CURLF (Curaleaf). Be aware that OTC stocks typically have wider bid-ask spreads and lower liquidity than exchange-listed equities, so using limit orders rather than market orders is strongly recommended to avoid slippage.

For investors who prefer major exchange-listed options, Canadian licensed producers like Tilray (TLRY) and Canopy Growth (CGC) trade on NASDAQ. Ancillary companies like Scotts Miracle-Gro (SMG) trade on NYSE. Cannabis ETFs like MSOS trade on major exchanges and provide diversified exposure to US operators through swap agreements that circumvent direct OTC ownership restrictions some funds face.

Before investing, educate yourself on the unique risks of the cannabis sector: Section 280E tax implications, state-by-state regulatory differences, share dilution risk (many cannabis companies frequently issue new shares), and the impact of potential federal policy changes. Start with a small position size — many experienced cannabis investors recommend allocating no more than 5-10% of a total portfolio to the sector — and build positions gradually as you develop conviction in specific companies or the sector thesis.