Watch out for this before jumping on the cannabis investing bandwagon

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Seth McConnell | Denver Post | Getty Images

Snoop Dogg exhales a heart-shaped cloud of marijuana smoke while doing a Q&A with the audience after the screening of his documentary Reincarnated during the first-ever ‘Green Carpet’ event at the High Times US Cannabis Cup, April 19, 2013, Denver. (Photo by Seth McConnell/The Denver Post via Getty Images)

If you walk into one of MedMen‘s cannabis retail locations, you will be greeted with rows of tables equipped with tablets that you can use to browse for items. While the layout may resemble an Apple or other tech store, the products are much different.

MedMen’s selection includes traditional marijuana products, including pre-rolled joints and/or plants sold in jars ready for smoking.

Also on sale are nontraditional items, such as water infused with Cannabidiol, or CBD, which is aimed at helping athletes’ muscles recover after activity, or topical creams that can help with everything from pain relief to skin irritation.

The company has 14 locations in states such as California, New York and Nevada. But it has licenses for more than 50 stores, having just added deals for new locations in Florida. The company plans to add a new store to its roster every four to eight weeks.

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In addition, the company’s employee ranks have grown to more than 800 employees today, from about 45 employees in 2016.

For investors the promise of explosive growth that these businesses offer have prompted one big question about the cannabis industry: How can I invest?

“This is a play for people who want to be early, and it’s still early,” said MedMen CEO Adam Bierman.

But just like trying to buy tech stocks in the late 1990s, “it’s not for everybody,” Bierman said.

A big reason for that is the great volatility the industry is experiencing. Investors in this space have to be able to stomach sharp ups and downs. For example, Tilray, a producer of medical cannabis, saw its stock sink more than 11 percent on Monday after posting a 12.8 percent gain last week.

And there’s also the elephant in the room that will make or break the fate of many of these companies: whether marijuana use will become federally legal.

“You are investing in a great unknown,” said JJ Kinahan, chief market strategist at TD Ameritrade. “The great unknown is going to be around legislation, and you always have to be careful when it comes to that.”

If you still think you want some exposure to this space, there are several ways to do it beyond traditional pot stocks. But experts urge you still need to keep some key warnings in mind.



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