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National Institute for Cannabis Investors
1125 North Charles Street
Baltimore, MD 21201 USA
When trying to trade cannabis stocks as an American investor, you might occasionally find limitations in what kinds of stocks you can buy at some brokerages, however. Not all of them will trade Canadian or even OTC stocks, though access has improved immeasurably over the last year or two.
Fortunately, most of the biggest U.S-based brokers now allow you to trades stocks listed in Canada, notably ones on the Toronto Stock Exchange (TSX) and the Canadian Securities Exchange (CSE) just as if you were buying Apple or Ford.
Whenever a stock trades in Canada and the United States over-the-counter (OTC) markets for our NICI Membership or The Cannabis IPO Insider subscribers, my trade instructions will tell you where it’s best to buy the shares. If you’re trading a stock which NICI has not recommended, you generally will do a little better buying it on a Canadian exchange than getting it OTC.
But first, you have to sign up with an online brokerage.
Signing up with any online brokerage is easy. It’s like applying for a credit card or renting a car. In fact, signing up for a brokerage account is almost as easy as signing up to be part of the National Institute for Cannabis Investors.
You just go to the sign up area on the website and put in all your information: name, address, and so on. You’ll also enter a banking account number so you can actually put money into your brokerage and then make your stock buys.
It’s all normal and no riskier than using your credit card at a grocery stores or gas station.
First off, go through the resources on the website and your Dashboard. NICI has assembled free reports, videos, how-to training sessions, and more that can turn even the most intimidated new trader into an expert in rapid fashion. But, if nothing else, look out for the regularly occurring trade alerts and follow the advice of Executive Director Greg Millier, who is also NICI’s lead analyst. Of course, make sure you have a way to trade stocks – be it a physical broker or an online account that you put money into.
As a member, you will receive on average 1-2 new recommendations a month emailed to your inbox. These trades will be added to the Portfolio within 24 hours. The Portfolio is where we track all of our open trades. If you became a member after we made a recommendation, you can find out whether it is still a valid buy or not by checking the “Notes.” Valid trades will be listed as “BUY.” Sold positions will be removed from the Portfolio within 24 hours.
Since most of my trades of the best emerging cannabis stock opportunities don’t involve companies listed on the New York Stock Exchange or Nasdaq, let’s take a look at your best options for buying TSX, CSE, or OTC stocks (in no ranked order).:
Interactive Brokers LLC (interactivebrokers.com) – Investors may trade Canadian stocks with no notable restrictions. Our research team have asked if trades with three of our first five recommendations for the CSE listing of a stock could be made, and a representative said they could do so with no problems.
Fidelity Investments Inc. (fidelity.com) – Fidelity will allow you to buy through Canadian exchanges and automatically converts your purchases to Canadian dollars when buying a stock from there. Fidelity does have a policy that it will automatically convert attempted purchases of stocks trading at a penny stock prices – the Securities & Exchange Commission defines a penny stock as anything trading for less than $5 per share – to whatever the OTC stock is.
TD Ameritrade (tdamertrade.com) – This broker will accept trades on Canadian exchanges. However, you would need to call in and talk to a live broker to make such a trade. Meanwhile, a customer can place their own trade for an OTC stock on the online platform.
eTrade (https://etrade.com) and TradeStation Group Inc. (https://tradestation.com) – These brokers do not yet offer any Canadian cannabis stock trades. However, you can buy OTC listed stocks, though foreign stocks will be limited as well (tickers ending in ‘F’).
All brokers may require additional fees beyond normal costs. Please reach out directly to your broker for further information.
Additionally, while we do try to accommodate all investors, we do cater specifically to American customers and therefore our recommendations are geared towards those who have American citizenship and are not effected by foreign law. Customers outside of the US will have to carry out additional due-diligence to make certain that they comply with and understand their local laws and regulations regarding investing.
Occasionally, Don will request that you buy a ¼ of ½ of a “stake” in a certain position. All you’re doing is approaching the investment in stages. In these situations, if you wanted to invest a total amount of $500 towards X company and were told to buy a 50% or ½ stake, you would only invest $250 at that time. Later, Don will issue another alert to buy the remaining ½ stake, which you have already set the funds aside for!
Why is this strategy employed? Well, if the stock temporarily depresses, it helps us get into the stocks at better prices than if we had done it all at once. Now, at times when the markets are flying upwards, Don’s instructions will usually have you buying the entire stake at once.
You can find the latest version of a recommendation in the Notes column of the Portfolio.
When you own a company’s stock, you own part of the company. How much you own depends on how many shares of stock you have. Holders of common stock are the last to be paid any profits from the company but are likely to profit the most from any growth it has. Owners of preferred stock are paid a fixed dividend before owners of common stock, but the amount of the dividend doesn’t usually grow if the company grows.
A security that represents the right, but not the obligation, to buy or sell a specified amount of an underlying security (stock, bond, futures contract, etc.) at a specified price within a specified time.
The single most significant difference, however, is that buying and holding stocks essentially holds you hostage to the market – you make money over the long haul if the stock goes up in price, and you lose money if the stock goes down in price. When you buy stocks, you’re at the mercy of the markets, which could cost you – big time. In fact, U.S. stocks are more expensive now than ever before.
But not options…
You can think of options as “renting” 100 shares of stock – without ever buying the shares outright.
Options offer an amazing versatility that you can use in a variety of ways to profit from a rise or fall in the underlying market. They can provide you with that same kind of safety net for your investments and trades.
Call options let you profit from rising stocks, whereas put options let you profit from falling ones – all without risking any more money than you put in at the beginning. And in times of high market volatility, options are a welcome relief from the uncertainties of traditional investing methods
Unlike stock positions, you’re not limited by market direction either. Whether the market moves up, down, or sideways, there’s always a way for you to profit using options.
And maybe best of all, simply by adding options to your portfolio, you can quickly – and easily – create a potentially unlimited stream of income.
At times, your broker may restrict you from immediately purchasing one of our recommendations. This is due to their interpretation of what is called the “Safe Harbor Rule” under Rule 903 put forward by the Securities and Exchange Commission in 1998 as part of their role in regulating securities transactions. This is also referred to as the “40 day rule.” It specifically prohibits brokers from selling shares of U.S. companies that have been sold in other countries, such as Canada. However, customers are not prohibited from buying those shares. Even though you should be allowed to place an unsolicited bid, conservative brokers may interpret this ruling very strictly and prohibit the purchase of said shares until the 40 days have passed.
What can be done about this? Well, there are three primary courses of action. The first is to switch brokers; only certain brokers have this strict interpretation and the competition would love your business. Second, pressure you broker into reconsidering their ruling: email or write in explaining your frustration. Follow that up by following through on the first option which is to leave their service. Finally, your third choice is to wait the 40 days until the broker allows you to invest. The good news is that, though waiting is sub-optimal, often you are not going to miss out on the IPO price and the trade is still effective.
To be an “accredited investor,” one of these two conditions must be met. You must have earned an income over $200,000 or $300,000 if you are married, during the past two years. Or… You need to have a net worth greater than $1 million, not including the value of your home. There is no certification or documentation that names you as an accredited investor. Instead, the company behind the private deal you are trying to engage with will put you through their own screening process to verify your status. Typically, this is just a signed form from your broker or accountant verifying your assets.
Non-accredited investors make up the bulk of investors around the world. In fact, when someone mentions “retail investors,” they often mean non-accredited investors. Put simply, this term covers anyone who has less than $1 million in assets, aside from the value of their home, and earns under $200,000.
Reg A is considered a “public offering” because all Reg A offerings can be generally advertised.Prior to passing of the JOBS Act, Reg A offerings were limited to raises of no more than $5 million, but they could raise money from any type of investor. With the JOBS Act, that limit was raised to $50 million, subject to two tiers. Tier 1 offerings can raise up to $20 million in any 12-month period, can be marketed anywhere and raise money from any type of investor. Tier 2 offerings are often called a mini-IPO because the securities can list on stock exchanges such as the Nasdaq or New York Stock Exchange. Through a Tier 2 offering, companies can raise up to $50 million over 12 months. However, if the investor is not an Accredited Investor, then they cannot invest over 10% of either their annual income or net worth, whichever is greater.
The short answer is “no.” Unless you are an angel or pre-IPO investor, investors may buy and sell stocks as frequently as their brokerage allows.
The National Institute for Cannabis Investors is not a broker, dealer, or licensed investment advisor. We are a publisher and are prohibited from providing individual investment advice. As a courtesy to our subscribers, we provide a list of brokers on our website. No person or company on that list should be considered as permitted to engage in rendering personalized investment, legal, or other professional advice as an agent of NICI. NICI does not receive any compensation for these services. Additionally, any individual services rendered to NICI by the companies listed are considered completely separate from and outside the scope of services offered by NICI. Any contact and resulting relationship is strictly between you and the company.
Any investment contains an element of risk. There are some risks that an investor can control, and others they can only guard against. General economic factors, inflation, market value fluctuations, and general conservatism are all risks to every investment. It is important to make well-judged investments based on thorough research in order to minimize your risk. It is also important to speak with a financial advisor in order to better understand these risks and market terminology to help assist you in making better decisions for your long-term portfolio.
We get this question a lot, and it’s impossible to answer, because every investor’s objectives and risk tolerance are different.
The short answer: That’s entirely up to you and your broker.
In general, we do recommend two risk management principles: 1) following a “position sizing” discipline that works for you and 2) using trailing stops to protect your principal and your profits. Beyond that, we can’t offer any advice about how much to invest in any position.
One rule of thumb you may want to follow is to make certain you don’t have any more than 2% of your risk capital exposed to any single investment (unless specifically advised by the editor). Studies show that this helps keep risk down to palatable levels, while still allowing you to build a diversified risk portfolio capable of stellar performance over time.
When your 2% max investment is combined with a 25% trailing stop, you should never lose more than 0.5% of the value of your total portfolio on any one play. Let’s say you have $100,000 to invest. The max you would put into any position is $2,000. And with a 25% trailing stop, the most you could ever lose in that play is $500 (1/200th of your total).
When it comes to controlling risk and position sizing, there are many rules, but one trumps them all… don’t play the game if you don’t have the cash to back it up.
Note: The Securities and Exchange Commission regulates the financial publication industry. Due to regulations enforced by this agency, we are prohibited from providing our customers with personalized investment advice. Because we are financial journalists – not advisors or brokers – newsletters and investment advisories should never be interpreted as personalized investment advice. Any decisions related to investment amounts should be left entirely up to you and your broker.
It is no way a crime to buy a stock that is on a public stock exchange in the United States or Canada. U.S. government restrictions on the use or sale of cannabis in no way include people buying regular stock in a publicly traded company.
A Note About COVID-19
At NICI, our thoughts are with all that have been affected by COVID-19 and those on the frontline. Here in Baltimore, we are doing our part to keep our team, our customers, and our community safe by working remotely when possible. Please note during these times we anticipate our response time to anything you have mailed in may be a little longer than normal, but rest assured we will take care of you.
We appreciate your patience, as we’re all in this together.