Investing is a tricky business, one that often requires sheer acts of clairvoyance. Ask any investor—successful or otherwise—and they’ll all say, more or less, the same thing: Playing the market well is your key to winning. So, when should you “play” and not, and is a bear market a good time to start dabbling in cannabis investing?
Well, there’s a lot of factors that go into answering that question both authentically and correctly. Let’s go into nitty-gritty details on bear markets and what they mean for the future of pot stocks.
What is a Bear Market, Anyways?
When most people think of stock markets, they usually conjure-up thoughts about bull markets. However, there’s another animalistic financial trend out here: a bear market.
Put simply, a bear market is marked by a turn in confidence by investors who losing interest in once fruitful stocks, fearing that they might spiral down and cost them hundreds, thousands, or even millions of dollars. And the pessimism that often comes in tow with bear markets is only made worse by the fact that many of these investors create widespread pandemonium by, in some cases, selling their entire portfolio.
Also, a bear market is usually followed by a sharp 20 percent (or more) downturn in stock prices. Sometimes those stocks bounce back and begin to steadily, other times they don’t—and those stocks bottom-out.
Are Bear Markets All that Bad?
On the surface, there’s little good to report about bear markets. But, once you begin pulling back the layers, a few silver linings come shining through.
For one, buying into evergreen stocks during a bear market could be one of the wisest investments you ever make. Generally speaking, the stock prices in bear markets are substantially lower than those in bull markets. Thus, this makes it an opportune time to buy in on certain stocks if you’re a savvy, frugal investor.
Also, bear markets are good litmus tests for public companies and industries. In the past hundred or so years, there have been financial periods marked by 32 bear markets, each lasting about ten months or so. If a company or industry that can weather these ebbs and flows in stock prices, then suffice to say that they’re here to stay—and, potentially, grow later on.
How does a Bear Market Affect Pot Stocks?
While the overall future of cannabis looks strong, pot stocks and bear markets, for the most part, aren’t’ a good mix.
Marijuana stocks have already been pretty uneven during our most recent bull markets, so it’s not too much of a stretch to say that they won’t fare well when the bull collapses. In a nutshell, a dip in stocks during bull markets means that those same stocks will likely pitfall, come a bear market. Many industry experts believe that this encroaching bear market could put pot stocks at double-digit percentage movements down in value, prompting investors to rid their portfolios of them, ASAP.
So a word to the wise: If you’re looking to get into pot stock trading and it just so happens to be a bear market, stay clear. And if you’re already knee deep in pot stocks and worried about the pitfalls of a bear market, do your best to hold on to them. Odds are that they’ll bounce back when the next bull market comes around.