Hemp stocks are gaining attention as medicinal and recreational marijuana hits headlines. So should you be investing in hemp in Australia?
Hemp 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 such as textiles manufacture for clothing. There is a growing hemp industry in Australia, and it is possible to invest in hemp in Australia by buying the stock of companies involved in the farming, refinement, manufacture, and sale of hemp products. So should you invest in Hemp in Australia?
Introduction to Hemp
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 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. If this is something you want to do, you can invest in these companies directly through a stockbroker. Alternatively, to get more diversification you could choose to invest in a hemp or Cannabis sector ETF – a parcel of cannabis and hemp stocks all bundled together. In Australia, there are no listed cannabis ETFs on the ASX. However there are 6 listed ETFs in the US, which you could access with an international shares trading account.
Most of these cannabis and hemp stocks are classified as ‘penny stocks’ due to their very low trading price per share and overall low total market cap. You should be warned though – penny stocks in general are highly volatile, and it is not unusual to see massive swings of 20% or more in trading price fluctuations per day.
So, should you invest in hemp stocks in Australia?
Whilst investing in hemp stocks in Australia you might see some dizzying highs as your penny stocks triple in price, but you might also experience some crushing lows as the company tanks or the stock potentially even goes to zero and you lose it all. The hemp industry, and penny stocks in general, are pretty volatile and thus could be called high risk.
Ultimately, no one can answer the question of whether you should invest into hemp stocks except yourself, or maybe a suitably qualified financial advisor that you have paid for advice.
Generally speaking though, investing in a particular stock or even concentrating on a particular sector goes against my personal investing strategy, so I am personally not investing into hemp stocks in Australia. But remember, don’t just blindly follow what I do or don’t do.
I think you should ask yourself ‘Why do I want to invest in hemp stocks in Australia?‘ 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. Do as much research as you can, weigh up the pros and cons, and then ask yourself whether this fits into your long term financial plan.
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’.
Financial Information Disclaimer
Financial Disclaimer: CaptainFI is NOT a financial advisor and does not hold an AFSL. This is not financial Advice!
I am not a financial adviser and I do not hold an Australian Financial Services Licence (AFSL).
In this article, I am giving you factual, balanced information without judgment or bias, to the best of my ability. I am not giving you any general or personal financial advice about what you should do with your investments. Just because I do, or don’t do something with my money (or use a particular service or platform) doesn’t mean it is automatically appropriate for your personal circumstances. I do not recommend nor endorse any financial or investment product, and my usage or opinion of any product should not be interpreted as an endorsement, advertisement, or intent to influence.
I can only provide factual information based on my journey to Financial Independence, and that is provided for general informational and entertainment purposes only. I make no guarantee about the performance of any product, and although I strive to keep the information accurate and updated as it changes, I make no guarantee about the correctness of reviews or information posted.
Remember – you always need to do your own independent research and due diligence before making any transaction. This includes reading and analyzing Product Disclosure Statements, Terms and Conditions, Service arrangements, and Fee Structures. It is always smart to compare products and discuss them, but ultimately you need to take responsibility for your use of any particular product or investment to make sure it suits your personal circumstances.
If you need help and would like to obtain personal financial advice about which investment options or platforms may be right for you, please talk to a licensed financial adviser or AFSL holder – you can take the first steps to find a financial advisor by reading this interview, or by visiting the ASIC financial adviser register and searching in your area.