Investing in Weedstocks to Reach Financial Independence

The following is a guest post from Save Stacks

There are many routes to financial independence. The average Joe works at his job for 30 years and ends up with a nice fat pension. Most people reading this blog are taking a different approach, to limit time in the work force. The most common methods are usually dividend investing or real estate to reach FI.  I’ve gone on a completely different path, investing in the newly forming MJ industry.

Start of My FI Journey

I started my FI journey like others, stumbling across a blog like this one. You end up catching the bug, thinking there is a different way of life than being a cubicle slave.

I was on the verge of buying a $70,000 truck, luckily I was saved just before making that mistake.  Instead I started buying my company stock options, which pay out a decent dividend. I was now obsessed with getting more dividend income.

Dividend stocks are awesome, paying you 5% per month and also gaining value at the same time. A lot of wealth has been generated from dividend stocks.  Kevin O’Leary from the Shark Tank only buys dividend paying stocks.

Transition to High Risk Stocks

When I started investing I was about 28 years old.  I spent a few years investing in divined stocks and made decent returns. I was starting to think about my age and risk tolerance, at my age, I could be investing in stocks with a bit higher risk and better return.

In 2014 news came out about a company called Tweed Inc. It was the first Canadian weed stock and I was very interested. It seemed simple to me, invest in a company at the very start of an industry. The other great thing was that the industry is already proven, people like the use marijuana already, they just get it from the black market.  So I wouldn’t be investing in a brand new product with hopes that it would take off, like the Segway.

Initial investment

So at the IPO I bought in to Tweed Inc(Now Canopy Growth), which over time I have learned was a mistake. The stock continued to drop, going from $4 to $1.50, I did the smart thing and dollar cost averaged buying all the way down to near bottom.  When it was all said in done, I had $6,000 invested in Tweed Inc. Panic started to set in, what if I was wrong and this was a mistake. I stopped buying and would wait long term.

Time in the Market

Eventually my decision paid off,  Tweed Inc started rising in value.  Many more companies started to come on the market such as Aphria (APH) and Aurora (ACB). I happened to have about $10,000 in dividend stocks which I was holding as short term savings for buying that expensive truck. Over a year of holding these dividend stocks the value actually went down even with the dividends paid.  Around this time oil stocks were also cutting dividends, so I sold off some of those as well. I ended up putting this capital into a few different weedstocks at levels I felt comfortable with, about $2,000 per stock. I felt I could handle losing that amount of money if the stock went to $0.

Growth Phase

Shortly after the stocks surged, there was explosive growth, which did not hold. Hype around upcoming legislation caused the stocks to spike in November 2016.  This is when I really learned the hard way about investing in volatile high risk stocks.  There were days when my portfolio would be up $10,000 then down $10,000 in one day. The index below shows the overall industry growth, depending when you bought you could have tripled your investment.

Results

Investing in weedstocks has been a journey to say the least. It has helped me to learn more about investing, especially the psychology behind the scenes. The dropping share prices in July 2017 almost made me sell of my position, by not panic selling and instead buying during the decline has increased my earnings even more.

I started off my FI journey with an initial goal of $1000 per month in dividends. I am now at the point where I could cash out and generate about $833. If I had been investing in just dividend stocks I don’t believe I would be anywhere near this amount.  Investing $1,000 per month into dividend stocks with 5% yield would pay out about $4 per month.  It would take about 208 months or 17 years to reach this. (Not including dividend increases of course)  One stock I recently bought went up 100% in about a month and a half, increasing in value by $4500, that’s a lot of months worth of dividends. I’m not looking to day trade, holding long term at the start of an industry, just happens there are some huge gains happening in short time.

Why I continue to Hold

Legalization in Canada is set to happen in July 2018, so the industry is still in it’s early stages. Currently the companies are supply the medical market and ramping up production to meet the upcoming recreational market.  There are also many other countries starting to open up to the idea of legalized weed, Canadian companies are at the forefront of the industry and could become world leaders.

As time goes by, the industry players are starting to generate more revenue and starting to turn a profit. With major expansions under way most companies are not profitable, which many investor pundits say to stay away. I see this as an opportunity, buy when others are scared, sell once they go mainstream.

There is obvious risk, not all companies will survive, they may go bankrupt or face other issues such as recalls. We also don’t know if they will truly reach profitability due to how the product will be priced or taxed.

This is just my approach to achieving financial independence, for sure not for everyone. Investing in safe reliable companies, you are guaranteed to become FI, it just might take longer.  I hope to accelerate my journey.

I blog about my journey, the ups and downs of investing in a high risk market, on twitter @savestacks and over at www.savestacks.com if you want to check it out. My personal favorite post is Behind the Scenes Investing in MJ stocks where talk about some of the stresses involved, such as my wife telling me to sell everything when a peak occurred and yes I should have listened!

Thanks for reading.

7 thoughts on “Investing in Weedstocks to Reach Financial Independence

  1. Thanks for sharing!

    The debate of growth vs. dividends is always an interesting and often heated one.

    Sounds like you fall into the camp of growth.

    Think you’ll ever shift money back over to dividend stocks?

    • Hey Nick, I will be going back to dividend stocks eventually as I get older and less risk tolerant. I still agree that dividend can create a lot of wealth! Thanks for the comment.

  2. Nice post Savestacks.

    I have some similar conflicts of not wanting to miss out on large potential growth opportunities, but also grow the income and dividend growth stocks as well.
    Where I now have 5% of my portfolio in growth stocks.

    And where when planning for my next purchase, do I either go with steady monthly income stocks, blue chip DGI or higher risk stocks that have the reasonable potential to have large gains. (Reasonable being TSX Marijuana companies)

    Happy to hear though that you did not go ahead with a 70k truck!

  3. Most interesting to me is the uncertainty around the MJ industry especially here in the U.S. It’s the old risk reward argument. Uncertainty equates to risks. Taking bigger risk with one’s investments theoretically should equate to higher reward. Not for me, but interesting article and interesting industry in it’s formative years. Thanks for the post. Tom

  4. Nice read!

    I looked at the figures of Tweed Inc when the price dropped after the IPO, mainly because I was looking at the stock as some new kind of pharmaceutical which could potentially generate decent cashflows for a steady dividend, but I simply always have problems seeing the potential of new companies which don’t have a steady bottomline yet so I decided to not buy any stocks of Tweed and prefered to invest it in a regular, boring, pharmaceutical. I agree with the post of Tom above that Tweed had a risk profile which not fits into the portfolio I try to build up.

  5. Regis LeClerc says:

    Good read and interesting.
    My son gave me the bug about Mj and asked me to look into it for him.
    I now have 11 Mj stocks from Pharm., grow, lighting, Bio. Etc. Very diversified in the whole Mj industry.
    Not looking for big profits for at least 1 to 2 years, maybe! Son not in Mj’s

  6. Pat M says:

    Interesting Read;
    Enjoyed reading your view on investing in MJ stocks and risk/reward decisions. I believe in a bucket where you have good solid dividend stocks, fixed income, cash and riskier growth stocks with the last bucket varying depending on your age and amount of funds able to risk. Even though I am entering my 60’s I think owning some strategic MJ stocks fits into that riskier bucket and has the potential for growth. I have also encouraged my 21 year old son to invest a limited % of his TFSA into these strategic companies. I believe this is like the old .com days (Google, FB, etc.) when so many investors said “Oh they won’t last”.
    You were smart to invest in returnable assets rather than a depreciating asset, but also enjoy along the way!

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