With the growth of the cannabis industry in Canada and in the US, investors have a variety of options for supporting startups or purchasing stock. Not only that, but cannabis companies have dominated the main exchanges, making incredible gains. For many investors, the simplest option when it comes to purchasing stock is to trade directly on their country’s own stock exchanges. However, for serious cannabis investors, it may be beneficial to trade on both US and Canadian markets. Here’s why.
Longer Trading Hours
Ultimately, many popular stocks are available through both Canadian and US exchanges. So why should cannabis investors bother to get a trading account in a different country?
For one, it can extend trading hours. Canadian investors who choose to get a US account will be able to trade before and after market open. This can be a boon for new releases, even when the same stock is traded in Canada. Because so many important trades happen before market open, having a seat at the table is key.
Take Advantage of Different Trade Volumes
One might think that stock in one cannabis company is the same regardless of which side of the border your own. However, we’ve found that’s not the case. While you may expect that stock prices and trades for a particular company would be consistent in both Canada and the US, but due to a higher volume of trades in the US, that’s not generally the case. In fact, some Canadian companies have a higher volume of trades on US exchanges, while some US companies have a higher volume of trades on Canadian exchanges. Being able to trade in both countries can help you maximize your stock growth and trade potential. It can also help you diversify. Rather than filling your portfolio with stock from just one exchange, having stocks from multiple exchanges can help safeguard against stock market swings and off days.
Risks of Investing in “Foreign” Exchanges
We’d be remiss if we didn’t mention the risk of investing in exchanges in another country. While Canada and the US share a large border and are generally cordial, investing always comes with risks.
For one, you may incur different transaction charges. It may be more expensive to invest in US stocks than on Canadian exchanges. You can check the transaction fees before making the jump in order to safeguard your pocketbook.
In addition, there’s the issue of the exchange rate. When in investing with a foreign currency, you have to consider the exchange rate into your calculations to determine whether a stock will remain viable. If the exchange rate changes, that could affect the value of your investment. Over time, the CAD-USD exchange rate has remained relatively stable, however, it has certainly had its ups and downs over the past five years.
One other factor that could impact future investment is the fact that cannabis remains illegal at the federal level in the US. With over 30 states and territories offering medical cannabis and at least 10 allowing medical and recreational sales, legalization still has a way to go. As more states loosen their prohibitive laws, the value of US cannabis stock may increase, which means now is the time to start investigating US trading.