Learning the lingo is the first step in investing success…
The regular season in the National Football League (NFL) is over, and neither my New York Jets nor my fantasy teams made it to the finals.
But that’s okay.
I enjoy the camaraderie in my fantasy leagues.
It’s great to have people come together and bond over a passion.
Something, though, struck me about my hobby – if someone was going to play fantasy football for the first time, just learning the lingo would be intimidating.
Points per receptions (PPRs).
Putting someone in the flex spot.
If you’ve never played, that all sounds like gibberish. Eventually, it’s easy to get the hang of but, initially, it may scare people away. They might not feel comfortable asking what all the terms mean and perceive that they will be seen as stupid if everyone else seems to know something they don’t.
It’s the same with investing.
Being in finance as long as I have, I sometimes forget how many of our members are new to investing. Terms or investing strategies that are second nature to me may be completely new to you.
The Strategy Behind Investing in Stakes
Cannabis is a new and emerging sector, so the stock prices for cannabis companies are going to have more volatile price swings than the stock price for an established company like Boeing Co.
The stock price for a cannabis company could open at $20 per share one day and drop to $15 in a matter of days or weeks.
Consequently, it could also climb from $20 to $25 in no time at all.
With the understanding that volatility is a part of cannabis investing right now, what I like to do is invest in stakes.
The trading actions in my email alerts look like this:
Email 1 – Action to Take: Buy a 50% stake in X company. Pay no more than $X per share.
Email 2 – Action to Take: Buy your final 50% stake in X company. Pay no more than $X per share.
And here’s s deeper dive into why I do that.
Let’s say a stock is trading for $10 per share. We buy a 50% stake in a company, and that price drops to $5 per share. We then buy our next 50% stake at $5 per share.
That brings our average cost to $7.50 per share. We would only have to wait for the stock price to climb back to $7.50 to break even. Anything after that is profit.
On the flip side, if we bought all of our shares all at once for $10 per share, we would have to wait for the stock price to climb all the way back from $5 to $10 to break even.
Buying shares of traditional stocks is a great option for long-term investing – but if you’re ready for a chance to see up to 10X the return in 1/10th of the time, you should look at buying “Cannabis Lots.”
How My Trading Alerts Work
To put everything into perspective, I wanted to show you how it all works.
For example, I could tell our paying members to buy a 50% stake in a company when I send out an alert. If you plan to invest a total of $1,000 in a company, that would mean buying $500 worth of stock after the first email alert.
Then, when I tell our investors to invest their final 50% stake in a company, that will be the next $500 they invest, which will bring their total investment to $1,000.
Sometimes we will also buy stocks in 25% increments.
If you still plan to invest $1,000 in a company, your first 25% investment would be $250. Your next 25% investment would be for $250 and bring your total investment in the company to $500.
Your next 25% stake would be another $250, which would bring your total investment to $750.
Your final 25% stake would bring your investment to a total of $1,000.
In total, when we are buying 25% stakes, there will be a total of 4 investments.
With that theoretical $1,000 total investment, it would look like this:
That’s what it looks like when I send out a trade alert to buy a stock.
When it’s time to sell a stock, it will look something like this:
When I say to sell your position, that means to sell all of your shares.
To reference all of this, I would suggest either bookmarking this page or printing it out.
For tomorrow, I’m going to send you a special report about mergers and acquisitions. There’s going to be a flurry of activity, and it’s going to create some great trading opportunities.
With this trading guide and the M&A information at hand, you’ll be ready to buy shares of the company I’m going to talk about Wednesday if you haven’t already.
Executive Director, National Institute for Cannabis Investors
P.S. Last week, we shared an article about Robinhood releasing the ability to buy fractional shares… meaning you could start investing in the cannabis space for just $1. You can read that article right here.
5 responses to “This Is Why We Buy in Stakes”
January 06 2020