Investors May Be Gambling Too Much On Cannabis Stocks Without Appreciating The Risks: Ontario Securities Commission

Article by Mike Hager, Globe and Mail

Investors may be gambling too much on cannabis stocks without appreciating the risks: Ontario Securities Commission MIKE HAGER

Ontario’s securities watchdog says one in 14 Canadians own cannabis investments, but too many of those investors may be putting too much of their money into these stocks without appreciating the risks posed by the trendy – and volatile – sector.
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A national survey published on Wednesday by the Ontario Securities Commission (OSC) found 7 per cent of Canadians have invested in cannabis companies, and a further quarter of respondents do not own any of these stocks, but would consider buying them. A quarter of those who said they were already in this market invested $10,000 or more. The agency also said it is worried because people without much financial knowledge or appetite for risk were just as likely to own cannabis stocks as more sophisticated investors.
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“Behavioural insights show that some investors may be predisposed to seek out and buy into the latest, most popular investments – and may do so even if these investments don’t fit their long-term financial goal,” the OSC said in its report. “These investors may overestimate their risk tolerance and might not diversify their investments enough.
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“Chasing trends can be exciting, but it’s important to make a long-term plan and stick to it.”
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A third of the respondents to the survey, which was conducted earlier this month by Innovative Research Group through an online panel involving 2,259 adult Canadians, said they made their first cannabis investments in the past six months. Roughly that percentage said they decided to buy these shares in part based on the advice of a family member or friend, while only 18 per cent relied on the advice of a financial representative or their portfolio manager, the OSC said.

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