Should you invest in hemp in Australia?

Hemp however is the name given to the Cannabis strain cultivated for industrial (non-drug) use. Hemp is not a narcotic, and is one of the fastest growing bio-masses known. It is farmed for this fast growth rate, and its high fibre content allows it to be used for a variety of purposes.

Hemp is a very versatile plant; its fibres have traditionally been used to create strong ropes for use in shipping, but increasingly with modern production techniques we are seeing hemp fibre being used to make a myriad of commercial products including paper, textiles, fabrics for clothing, paper, bio plastics, biofuel, construction and even as a food! Hemp fibre is becoming known as the world leader in sustainable clothing.

hemp
Hemp seed is actually a nutritious food source

Hemp comes from the same family of plant as Marijuana, of course which has its own financial and investing craze going on around its psycho-active constituent THC (Tetra-hydro-cannabinol), as the world slowly decriminalises the drug, making it legal for medical research purposes and limited personal recreational use. But Hemp itself

How to invest in hemp or cannabis stocks in Australia

Investing in hemp or cannabis stocks in Australia is relatively straightforward. You can choose to invest in these companies directly through your broker (I use Australia’s lowest cost broker Self Wealth). Most of these cannabis and hemp stocks are classified as ‘penny stocks’ due to their very low trading price per share. Alternatively, you could choose to invest in a hemp or Cannabis sector ETF – a parcel of cannabis and hemp stocks all bundled together – just like we are familiar with with total stock market index fund ETFs.

In Australia, there are no listed cannabis ETFs on the ASX. However there are 6 listed ETFs in the US, which you can purchase with an international shares trading account such as a Persher linked ComSec account.

You should be warned however, these penny stocks are highly volatile, and it is not unusual to see massive swings of 20% or more in trading price fluctuations per day. As such, the cannabis / hemp ETFs also have high volatility, but usually less so than the individual holdings.

So, should you invest in hemp stocks in Australia?

Personally I wouldn’t. Investing in a particular stock or even concentrating on a particular sector would go against my personal investing strategy of investing in the index and letting the market do the work for me, rather than spending time working myself to try and beat it. I also want to simplify my life and follow minimalist principles, which means trying to follow the KISS principle when it comes to investing.

I believe individual companies will potentially all rise and fall, but we have seen over the long term, living below your means and regularly investing into index funds is the surest way to generate long term wealth.

Investing in hemp stocks you might see some dizzying highs as your penny stocks triple in price, but you might also experience some crushing lows as the company stock goes to zero and you lose it all!

What I think you should do though, is ask yourself ‘Am I an investor or am I a gambler?’ Critically examine why you are thinking of investing in hemp stocks and weigh up if you think it is worth the risk for your personal circumstances.

For more information on investing in Hemp and Cannabis, check out the Motley Fools article ‘Is hemp a safer way to invest in the Cannabis industry’.

CaptainFI
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