Ah, so you’ve decided to add this retail behemoth to your portfolio? Well, before buying Amazon stock, here is what you should know.
This is where it calls out: “The bedrock of its success at Amazon, which has made buying online fast-and perhaps impulsive-easy for customers.”.
There may not be a “buy now” button for stocks, but buying Amazon has become about as easy as buying anything on Amazon.com — at least, now that it’s part of the Dow Jones Industrial Average.
How to buy Amazon stock and factors to think about before investing.
How to Buy Amazon Stock
You can buy Amazon stock through an investment account, otherwise known as a brokerage account. After making a cash deposit into the account, you will visit the brokerage’s website or platform and search for Amazon stock by typing “AMZN”. The other possible way through which you might buy Amazon stock is via Amazon’s direct stock buy plan.
1. Do your research into Amazon
There’s understandable attraction to holding shares in a company with which you interact regularly, but what you know about the company as a customer often doesn’t translate into knowing the company as an investor. It is quite easy to make that to-buy-or-not-to-buy decision based on a stock’s past performance or its current price. But you want to make sure you know what you’re getting yourself into with Amazon. This is to say you need to know, among other things, its management, revenue, net income and earnings, and the competition. Read How to Do Stock Research
Eliminate those variables, and you would like to know if, for your portfolio, investing in the stock of Amazon makes sense. All of this depends on one’s situation, current holdings, and goals of investment.
2. Decide on purchasing Amazon stock
You can find Amazon’s current stock price by looking up its trading ticker on a website that provides financial information or by contacting your online broker.
Before you commit, consider:
- How you’ll achieve diversification: As financial managers anywhere love to say, “diversification”-the process of not holding all of one type of investment in a portfolio the keyword. In other words, it is generally not a good thing to invest only in individual stocks. If the company has a bad year, accordingly your portfolio will go down. To offset that reality, many investors rely on low-expense mutual funds, like index funds, to make up the lion’s share of their investment portfolios. Most of those follow a market index and invest in scores of firms-in some cases, that includes Amazon-which could go miles in diversifying your portfolio and decreasing your investment risk.
- Your future investment plans: The rule of thumb is that it’s good to invest regularly. There’s even a name for such a concept: dollar-cost averaging. That means investing fixed sums of money in equities at fixed periodic intervals, as opposed to putting large sums of money into the market, or a stock like Amazon, all at once. You won’t keep purchasing stocks or different investments at high prices when you dollar-cost average.
3. Know exactly how much to invest with Amazon
How much to invest in Amazon is not essentially how much money one can afford. That’s because the stock market is considered a long-term investment, and financial experts generally advise against buying any stock with money you’ll need within the next five years.
It can also be a good idea to go into buying individual stocks with an adequate emergency fund and any important short-term goals saved for. Following are some suggestions for where to save for short-term goals.
If you’re just starting to put money into the market, or if you only have a tiny bit to invest, you also might want to know about fractional shares. These let you buy a portion of a share — based on the amount of money you set — rather than the full share. Not all online brokers offer them, but they can be a convenient option, and the offering is growing in popularity.
4. Open a brokerage account
To invest in Amazon, you will need to have a brokerage account, and the quickest, easiest ways to open a brokerage account are through online brokers. Without having one, it takes only about 15 minutes to get one; all you need to do is provide basic information, the same as opening a checking or savings bank account. Our guide on how to open a brokerage account will help you out.
If one share or more of Amazon fits within your budget, then the options can start to open fairly wide. Find a brokerage that has either low or no commissions, great customer service, and some of the most helpful tools and resources.
If your heart is set on Amazon, and you just can’t buy one full share at the trading price right now, go back to those brokers noted above that do offer fractional shares. A portion of an Amazon share can help you gain access.
5. Buy Amazon stock
You can now go ahead and invest in Amazon after opening the brokerage account and determining the amount you intend on investing.
Its value fluctuates throughout the day, but you probably do not want to be too concerned about getting a better price by a few pennies-more on that in a minute.
You’ll head to your online brokerage’s website or trading platform where you want to buy the stock. The kind of order that determines when and how to carry out your purchase order for AMZN stock will be up to you to decide.
Most brokerages will have a bunch of different order options, but for most practical use, you only really need two: a market order and a limit order.
- A market order takes place ASAP. Generally speaking, it’s a good option to choose for the long-term investor. You may pay a little differently than what you saw when you placed the order because, with a market order, time is prioritized: It is executed as soon as possible at the best possible price.
- A limit order will be an excellent choice if an investor prioritizes price over speed. Otherwise stated, you can instruct your broker to execute your trade at the instance when the price of the stock reaches your pre-stated price. This is useful during wild swings in the market. The risk here is that it may not be fully executed or executed at all.
Conclusion
This is the wise and smart choice for investing in Amazon stock (AMZN) in 2024. But your investment requires research and successful planning. You need to understand the company’s financials, assess how it fits in your portfolio, and make sure to keep maintaining diversification.
Consider fractional shares if needed and then open a breakage account. When it’s ready choose the right order type—market or limit—to effectively execute your purchase.
Applying all these steps you will be successful but consistency matters my beloved audience. Now it’s your turn!
