Almost exactly a year ago I wrote a blog warning people about the investment fad of the day: marijuana stocks.
Read that blog (published April 19, 2019) here: Should I Invest in Marijuana Stocks?
In the blog I provided a pretty clear warning that marijuana stocks were starting to reek of speculative mania and should be approached with caution at best, and probably avoided altogether. I hedged myself by saying I didn’t really know what would happen to the marijuana industry or particular marijuana investments, but the blog made my advice to investors pretty clear: stay away.
Yesterday curiosity got the better of me and I decided to check in with some of the biggest names from the marijuana boom.
A year ago, Canadian pharmaceutical and cannabis company Tilray was trading above $53 per share, riding high on the national legalization in Canada and cannabis boom in the United States.
Yesterday, a year later, shares of Tilray closed at a price of $6.76. Investors who purchased Tilray around the time I wrote my first blog on marijuana stocks are down over 85%.
Canopy Growth, another Canadian marijuana company, received a ton of hype a year ago, rising to a high just over $52 per share. Yesterday it closed just over $15 – down around 70%. Not as bad as Tilray, but still pretty rough.
Another big name of the cannabis craze, Aurora Cannabis, a Canadian cannabis producer, was trading just over $9 a year ago. As of yesterday’s close, a share of Aurora Cannabis is worth just 72 cents – down over 90%!
The point of this blog is not to say “I told you so,” but to remind everyone that investing in the fad or hot industry of the day can have serious consequences.
As investors we are often tempted to pick stocks or bet on an exciting new industry just for fun, just to see how we do - and as advisors we are often tempted to allow this type of thing with our clients. What’s the worst that can happen?
Vaporizing the vast majority of your investment – that’s what!
Investments in the main marijuana companies during the peak of the hype that occurred a year ago cost investors dearly. It was almost predictable, expectations for those companies were so high it was inevitable they would disappoint.
When we talk about the vast majority of your experience as an investor being determined by your behavior, this is what we are talking about. Will you stay disciplined and diversified? Or fall victim to the investment fad of the day? It matters.
As advisors, sometimes the best thing we can do is help people avoid mistakes. And as anyone who invested in marijuana stocks a year ago can tell you, avoiding mistakes can be extremely valuable.
Disclaimer: The charts above were pulled from google finance and are for illustrative purposes only. Past performance is not an indication of future results.
Paul R. Ruedi, CFP® is a financial advisor at Ruedi Wealth Management.
Paul has been quoted in news publications including USA Today, Time Magazine, The New York Times, Dallas Morning News, Forbes, Inc.com, Business Insider, US News and World Report, GoBankingRates, The Street, NerdWallet, and The Penny Hoarder. He also writes articles that have been featured in CNBC, Investopedia, Yahoo Finance, Nasdaq, and MSN Money. He was named one of Investopedia's Top 100 Most Influential Financial Advisors in 2018.
Previous Posts by Paul R. Ruedi, CFP®
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- Young Investors: This is What Panic Feels Like
- Retirement Planning for Freelancers
- Don't Wait Until Retirement
- Important Retirement Planning Ages
- The 9 Biggest Threats to Your Retirement
- Should I Invest in Marijuana Stocks?
- Lost Investment Accounts
- How to Use Your 401(k)
- Why People Switch Financial Advisors
- Your First Meeting With a Financial Planner
- The Retirement Mountain
- What is Wealth Management?
- Ship of Fools
- The Richest Person in the Graveyard