Over the last couple of weeks, we received quite a few questions on the topic of 401K and Marijuana.
2016 and was the year for Pot stocks as some saw impressive gains of well over 2000%.
2017 is expected to be even better. But does this mean that you should divert your 401K to marijuana related stocks? HEAVENS NO!
While the marijuana industry might seem appealing, it is still extremely speculative and fraught with risk. Furthermore, as of now, the U.S. Government is still against cannabis and are constantly trying to clamp down on the industry. Using marijuana continues to be an offense under federal law, according to the Office of National Drug Control Policy.
Related Article: What Does Trump’s Recent State Mean for Pot Investors
What is your 401(k)?
A 401(k) is a retirement savings plan sponsored by an employer. It is a plan that lets workers save and invest a piece of their paycheck before taxes are taken out.
Where is Your 401(k) Invested?
Most plans offer a spread of mutual funds composed of stocks, bonds, and money market investments. People that understand about investments can also have their funds invested in specific sectors or investments according to their choice.
Types of 401(K)
There are two types of 401(k) to choose from, although most people go for the traditional one and most companies allow you to enroll right away.
Wages are contributed before taxes from each paycheck, like. Taxable income drops by the amount you contribute and you pay income taxes on contributions and earning upon withdrawal. The drawback about this type of 401(k) is that you don’t have access to your funds before the age of 59 1/2 (There are exceptions)
Contributions are made with money that has been taxed. There are no taxes paid upon withdrawal.
Is Their Potential In Marijuana Stocks?
Hell Yeah, most stocks are still penny stocks and the large cap ones, big Pharmas, such GW Pharmaceuticals are investing heavily in the industry, creating vast potential in the market.
But it comes at a risk. Similar to most startups only a fraction of companies make it big time and turn into multi-millionaire companies. Most start-ups, especially in a new industry such as Marijuana, bite the dust and don’t evolve into anything.
With Marijuana Stocks there is a risk that you won’t make money on your investment, unlike more conservative investments such as bonds or mutual funds.
In addition, most of these companies have tiny market capitalization, which means they are extremely volatile. This means that they are mostly suitable for investors that are willing to take risks.
Therefore if you bank on your 401(k) being your retirement plan, you want to reach pension, sit back and have some form of security, then putting it in marijuana stocks is definitely not the best choice.
With all that being said, there is enormous potential in the marijuana market.
For example stocks like CNBX have gained by 6000%+ over a 4 month period.
How Do You Get In On the Action?
Before we get to the “How”, it is important to answer the “Should I”.
Marijuana investing isn’t for the light-hearted. There are two sides to every story, but if we may speak honestly, we MUST say that the risk/reward is extremely high – on both sides. This means that you can make a lot, but you can also lose a lot.
Therefore, rule number one is never to invest money you need or funds that you depend on, now or in the future. Rule number two, what type of person are you? Do you want to sit glued to the screen following stocks or you in it for the long term? And number three, does this industry interest you, as if not, then there is no point getting into it.
Let’s face it, most people are trying to get in as it is now a BUZZ, which is fine. The important thing is to do it wisely.
Here at WayofLeaf we are not financial advisors. We only trade marijuana stocks. We’ve been doing it for already 7+ years. From our experience we can tell you the following:
- If you are thinking of investing your 401(k) in the industry, then DON’T. It’s too risky.
- If you want to get in on the action and understand the risks involved, then go for it, but don’t risk your 401(k).
In both cases, it is always best to seek professional advice from a financial advisor.
Want to learn more about this explosive industry, check out our Pot Stock Trading Course. It’s packed with useful information.