A new survey of Canadian investors from the Ontario Securities Commission (OSC) finds one in four cannabis investors spend C$10,000 or more in stocks.
The report published on Wednesday (November 28), took into account responses from over 2,000 Canadian investors in October.
As cannabis investment continues its popularization in Canada, the OSC warns investors about entering the space for the reasons found in the survey.
Investments in the cannabis space have grown as the industry reaches legitimacy in Canada and beyond.
Adult-use marijuana became legal in Canada on October 17 and while Canadian companies have focused on the existing market, many are planning and executing on international ventures.
With this new interest and popularity for cannabis stocks the OSC is concerned investors are jumping into the space due to word of mouth.
The study found the cannabis sector has been dominated by behavioral investing. Thirty-two percent of the surveyed investors admitted to taking advice from friends and family when investing in the cannabis space.
Meanwhile, only 18 percent relied on a financial advisor or a portfolio manager within the industry, according to the survey.
“Those with low financial knowledge or who reported having a low risk tolerance were as likely as individuals with higher knowledge or risk tolerance to own cannabis investments,” the OSC wrote.
The OCS report highlighted 23 percent of the respondents admitted to spending C$10,000 or more in the cannabis sector, with 16 percent spending between C$5,000 and C$10,000.
Of the respondents, 36 percent of males between 18 and 34 said they would consider joining the space with 26 percent of women in the same age group also looking into the sector.
The survey found a large number of respondents, 66 percent, with pot stocks would primarily own those.
Only 13 percent primarily own pot stocks and have additional diversified holdings.
The study indicated 9 percent primarily invest on cannabis-focused mutual funds or exchange traded funds (ETFs).
When it comes to US investments, the growing cannabis market has earned a significant market share in the minds of investors, with the survey finding 28 percent invest in US-based companies, mutual funds or ETFs.
While investors won’t find any direct US cannabis opportunities on the Toronto Stock Exchange (TSX) or TSX Venture Exchange (TSXV), some companies on those exchanges have found ways to gain exposure into US operations from partners.
It is expected once federal law changes regarding cannabis, a majority of Canadian licensed producers (LPs) with strong cash positions will enter the US.
Companies operating in the US have come to Canada to raise capital as the investor demographic up north has adopted these stocks more quickly.
These companies focused in the US have joined the Canadian Securities Exchange (CSE) to begin trading stock since this exchange elected to not block US cannabis operating companies.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.