The Risks of Investing in CBD

The CBD health craze has brought with it plenty of investment opportunities. Everyone from CBD manufacturers to hemp plantation owners has put their stocks in the open market. And of course, you can also make an even bigger investment and open your own CBD store, or start a CBD brand. The latter is easier than ever today, as manufacturers are more than eager to hammer out white-label agreements that can help them move lots of products.

And while some analysts paint this as being the best time to invest in CBD, there are serious risks involved in the CBD market. Risks that aren’t necessarily deal-breakers, but that any cautious investor should keep in mind before moving into the market.

If CBD stocks are something that interests you, here’s what you should consider before making a big investment.

Risk #1 – The legality of CBD is in flux

Take the UK as an example. CBD was made legal back in 2014 when the EU legalized the growth of hemp and the sale of its byproducts within the block. But despite the legality of CBD, an upcoming FSA deadline has the potential of making most — if not all — CBD edibles illegal starting in March of 2021. 

That’s because CBD food manufacturers will need to go through a new Novel Foods application process, and the FSA has recently announced that approval of such applications may be withheld until more CBD research is made available. This could be catastrophic to various CBD ventures within the UK.

And that’s just one type of CBD product, in one country. Around the world, the legal status of CBD is in a similar state of flux, as legislators hurry to catch to this new trend. When investing in CBD, you risk losing a large portion of your money due to changes that happen overnight. And while some stocks are more stable than others, they are all subject to the second risk factor in this list.

Risk #2 – CBD research is still ongoing

There are very few studies available that look into the effects that CBD has on the body over a period of five years or longer. If research comes out tomorrow saying that long-term use of CBD is dangerous, the values of the stocks in that market will plummet overnight, regardless of whether the study is true.

The stigma associated with CBD combined with the novelty of the product means that even a misleading study could kill the health trend within weeks. All it takes is for said study to be reported on enough times.

Risk #3 – This market innovates faster than most

The newness of CBD combined with the large amount of cash flowing into the market leads to plenty of innovation. Few people had even heard of CBD until two years ago, and today it is in everything, from vape pens to pillowcases, with many more new products being released every month.

All of this is ok if you invest in CBD manufacturing, since new products will mean more demand for the raw materials needed to make CBD products. However, if you decide to invest in a specific product idea, you may find your chosen product being trumped or executed better by someone else overnight. The risk is as high as the potential rewards.

For more information on CBD in general, visit Cibdol’s CBD Encyclopedia.

 

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