Publicly traded marijuana companies are penny stocks, meaning they trade on the thinly-regulated and highly speculative over-the-counter markets. Penny stocks, regardless of the industry, tend to be far more turbulent than large cap stocks like Apple AAPL , Tech30 and Facebook FB , Tech30 that live on the major stock exchanges. Investors also need to be aware of the uphill legal climb the marijuana business still faces.

Yes, the legalization movement has some serious momentum, but marijuana is still illegal in most states and at the federal level. That kind of volatility tends to signal there's a lot of risk," said Nicholas Colas, chief market strategist at ConvergEx. Colorado's missing marijuana taxes.

Even relatively large marijuana stocks are subject to frightening price swings. Just look at the rollercoaster ride Medbox MDBX investors recently went on.

Investing veterans know that the smaller the "market cap" of a company, the riskier it tends to be. There are fewer shares changing hands, making it more difficult to exit a position. Investors high on marijuana despite risks.

None of this is to say that the marijuana industry is doomed to fail. There are intriguing dynamics that are luring investors as more states consider legalization. Just be careful how you choose to play the industry," said Colas.

In the abstract, absolutely. That's where it gets risky. The job search app for the legal pot biz. Part of that risk stems from the fact that penny stocks are not held to the same regulatory standards as more traditional stocks.

Visitors to the website of American Green AMNE , formerly The Tranzbyte Corp. In other words, investors have to just take the medical marijuana dispensary at its word. American Green admits that can put investors at a "significant disadvantage from a risk standpoint.

Don't smoke this: Why it's risky to invest in pot stocks - Sep. 4,

Want to study pot? There's a school for that. As you might suspect, there's also a certain level of questionable judgment involved in some corners of this market. For example, earlier this year Resource Ventures REVI released a statement saying it secured the consulting services of Hemp HEMP to help aid its expansion plans into the medical marijuana and industrial hemp industries. In the official statement, Resource Ventures said the deal will allow it to "take advantage of the explosive growth and stock feeding frenzy currently occurring in the industry sector.

It's hard to imagine a large public company talking about a "stock feeding frenzy" in a public statement. In another example, the Securities and Exchange Commission temporarily suspended trading in shares of GrowLife PHOT in April. The agency cited "questions that have been raised about the accuracy and adequacy of information in the marketplace and potentially manipulative transactions" in its shares.

Tourists flock to Colorado to smoke weed. That suspension triggered GrowLife, which plans to supply equipment to marijuana growers, to default on some debt.

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In a subsequent SEC filing, GrowLife highlighted a number of other risks facing its business, including the fact that it's dependent on the evolving legal landscape. So if these penny pot stocks are too dangerous, what's an investor to do if legalization gains further steam? Start your day right with the latest news driving global markets, from major stock movers and key economic headlines to important events on the calendar.

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