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Investment in the CBD Industry – Is it a Smart Opportunity or a Risky Move?

August 30, 2022 5 min read

Investment in the CBD Industry – Is it a Smart Opportunity or a Risky Move?

Investment in the CBD Industry – Is it a Smart Opportunity or a Risky Move?

CBD, or cannabidiol, is found in the hemp plant, a strain of cannabis besides marijuana. It's one of the many active compounds in the plant, and it's thought to have various therapeutic effects. Therefore, more and more people are investing in CBD since it's a booming market. This article will examine whether CBD is an amazing investment opportunity.
There's a lot of interest in CBD these days for various reasons. It alleviates various health conditions, including anxiety, pain, and epilepsy. The hemp legalization in 2018 facilitated the mass production of CBD for medical and recreational use. Various local and online stores can distribute CBD gummies, capsules, vapes, and tinctures.

There's also a lot of speculation around CBD's potential as an investment opportunity. It's a hot commodity, and its market is growing rapidly. The CBD market is expected to reach over $6.0 billion by the end of 2022. However, will CBD stand the test of time with looming market recessions that usually happen and affect blooming markets?

The Current CBD Market

The CBD market is currently in flux, with many businesses unsure how to proceed with CBD products. However, it remains a promising investment opportunity, as the demand for CBD products is only expected to grow in the coming years. Here are a few key things to consider when investing in the CBD market.
First, it's important to understand the regulatory landscape for CBD products. It is still a relatively new product, and the regulations governing its sale and distribution are still evolving. As such, it's important to partner with a company that is well-versed in the latest CBD regulations.
Second, it's important to identify the target market for CBD products. Its market is still relatively niche, and not all consumers know the benefits of CBD products. Therefore, it's important to identify and target the right consumers.

How to Invest in the CBD Market

When it comes to CBD, there are a lot of investment opportunities. The CBD market is growing rapidly, and there are many different ways to get involved.

One of the most profitable ways to invest in the market is to put money into related businesses. These businesses include convenience stores and clinics that offer CBD products. You can own a percentage of the business by leasing out the land that facilitates the store. This way, you make continuous profits which are passive income. Additionally, you can choose to own part of the business by becoming a partner. Therefore, you can make decisions related to the business that guarantees the success of the business.

Furthermore, you can invest in companies that produce CBD-based products, such as CBD creams, lotions, balms, gummies, and tinctures. These companies are public, so you can easily buy and sell shares, which means you own part of the company. Therefore, if the company grows and continuously makes more profit, you earn heavily from dividends paid to shareholders after a certain period. Also, these products are becoming increasingly popular, and there is a lot of potential for growth in this market. For example, skincare enthusiasts highly insist on using CBD-infused creams to have smooth, moisturized skin. According to Dawidowicz et al. (2021), CBD has antioxidant properties that improve skin health by alleviating free radicals, which fasten skin aging. Atalay et al. (2020) suggested that CBD has anti-inflammatory properties that reduce skin inflammation.
Moreover, you can invest in CBD-based research. In recent years, research around CBD products has grown since more people are embracing these products. According to Taylor et al. (2018), CBD has antiemetic properties that improve stomach and gastrointestinal health. Khalsa et al. (2021) suggested that CBD has anti-depressive properties that reduce stress and anxiety and improve mood.

The potential Risks of Investing in the CBD Industry

There are a few potential risks associated with CBD investments. For example, the cannabinoid market is still relatively new and unproven, so there is some risk that the market could crash and investors could lose money.

Additionally, the CBD market could be regulated in a way that significantly reduces its potential. For example, regulatory bodies could classify CBD as a drug, severely restricting its use.

The CBD industry has been infiltrated by fraudulent people in business who produce low-quality CBD products. These products cause various side effects, such as migraines, drowsiness, vomiting, and nausea. Therefore, the FDA may opt to step up its game and actively regulate CBD products in the market. However, some restrictions may negatively impact the CBD business. For example, a license costs $ 1 million, creating an impeded environment for businesses to compete fairly. Therefore, some businesses may opt to trade illegally, which further causes increased low-quality CBD products in the market.

What are the Top CBD Stocks to Watch in 2022?
There are a few CBD stocks that investors should keep an eye on in 2022. While choosing CBD stocks, it's important to understand the risks of investing in the cannabis industry. Furthermore, invest in your favorite cannabis companies and properly understand the various types of cannabis products available in the market.

Risks and Rewards of Investing in the Cannabis Industry

The cannabis industry is a rapidly growing sector that offers both risks and rewards for investors. For example, the marijuana industry is still illegal under federal law and is restricted in various states. Therefore, a cannabis-related business could heavily suffer from strict business regulations. On the flip side, the cannabis industry is expected to grow significantly in the next few years, and investors who get in early could profit hugely.
Furthermore, the cannabis industry, specifically the hemp industry, is still in its infancy. Therefore, there is no guarantee that the industry will continue to grow. Additionally, there are many different types of cannabis businesses, and not all are profitable. Investors should research before investing in the cannabis industry to ensure they invest in a highly profitable business.

The rewards of investing in the cannabis industry include the potential for high returns caused by the continuous growth of the industry and the possibility of becoming a leading player.
Therefore, investors should consider the risks and rewards of investing in the cannabis industry before making investment decisions.

Conclusion

CBD oil is a hot commodity right now. The CBD market is growing rapidly, and experts expect it to reach $6.0 billion by 2022. If you're considering investing in the CBD market, understand that hemp-derived CBD products remain unregulated by the FDA, even though the 2018 Farm Bill legalized industrial hemp production.

CBD products are widely available, and online retailers are not required to obtain regulatory approval to sell CBD products.

There also are various risks that could prevent the CBD industry from reaching its full potential. For example, the lack of standardization, the lack of regulation, and the potential for abuse. However, if these risks can be addressed while considering the welfare of CBD-related businesses, the CBD market could be a major growth driver for the cannabis industry.

References

Dawidowicz, A. L., Olszowy-Tomczyk, M., & Typek, R. (2021). CBG, CBD, Δ9-THC, CBN, CBGA, CBDA, and Δ9-THCA as antioxidant agents and their intervention abilities in antioxidant action. Fitoterapia, 152, 104915.
Taylor, B. N., Mueller, M., & Sauls, R. S. (2018). Cannabinoid antiemetic therapy.

Atalay, S., Jarocka-Karpowicz, I., & Skrzydlewska, E. (2020). Antioxidative and anti-inflammatory properties of cannabidiol. Antioxidants, 9(1), 21.

Khalsa, J. H., Bunt, G., Maggirwar, S. B., & Kottilil, S. (2021). COVID-19 and cannabidiol (CBD). Journal of Addiction Medicine, 15(5), 355.