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Amazon has established itself as an e-commerce giant over the last 30 years – and is now the fifth largest company in the world with a $1.8 trillion market capitalization.
The US technology giant also provides content through Amazon Prime Video and Amazon Music and is involved in publishing and cloud computing.
Investors are buying Amazon stock almost at its all-time high as the AMZN stock price has risen 89% over the past year from $92.43 to $175.39 as the market closed on March 12, 2024.
Its net sales increased 14% to $170 billion in the fourth quarter of last year – compared to $149.2 billion for the same period in 2022, according to its most recently announced results.
Here, we look at how to invest in Amazon stock, providing you with a step-by-step guide and major factors to consider before making any investment decision.
Key Takeaways
- Amazon is currently the fifth largest company in the world – and the biggest e-commerce player – with a market capitalization of around $1.8 trillion.
- You can invest in Amazon through a brokerage, get access via investment funds, or even apply for the company’s direct stock purchase plan.
- Amazon recently joined the Dow Jones Industrial Average – one of Wall Street’s most exclusive indexes – comprising 30 high-profile companies.
- The company recently announced net sales increased 14% to $170 billion in the fourth quarter of 2023 – up from $149.2 billion for the same period in 2022.
How to Buy Amazon Stock: A Step-By-Step Guide
So, for those considering how to invest in Amazon and earn money, what do they need to know?
Amazon went public in May 1997 with an IPO price of $18 – or $0.075 when taking the various stock splits into account. It currently trades on the Nasdaq under the ticker symbol AMZN.
The simplest and most popular way of buying Amazon stock is through a brokerage, although you can also get exposure via an investment fund.
For those wondering how to buy Amazon stock directly, the company has offered a direct stock purchase plan (DSPP) since August 2019.
1. Conduct Your Analysis
Before you invest in Amazon, research is essential. Don’t base your decision on past performances but on your evaluation of the stock’s prospects.
As a public company, Amazon is required to detail its financial condition through regular filings to the US Securities and Exchange Commission.
You can also see Amazon’s quarterly reports, annual reports, letters to shareholders, and press releases on the company’s website.
Stock market analysts, industry observers, and financial writers also regularly share their opinions on individual companies.
However, there’s no guarantee that their conclusions will be accurate. That’s why you should draw your conclusions based on a thorough fundamental and technical analysis of Amazon’s stock performance.
2. Decide on a Budget
How much do you have to invest? What percentage would you like to commit to buying into Amazon stock? These are important considerations.
It can be very easy to get caught up and put everything in one stock. However, that’s a significant gamble, as you could lose everything if the share price crumbles.
You can budget properly by establishing how much income you have available after paying all your monthly bills and other costs of living.
It’s also essential to have a so-called rainy day fund. This is a pot of easily accessible cash set aside for emergencies, such as repairing your car.
Once you’ve taken these into account, you’ll have more of an idea of how much money is available to start your investing journey.
3. Open a Brokerage Account
If you want to invest in Amazon via a brokerage, you will need to decide on the best-fitted stock brokers and open an account with them.
You will be spoilt for choice as there are hundreds of brokers available. Therefore, you should find the one that best meets your aims and objectives.
For example, if you’re relatively new to investing, consider online stock brokers for beginners, which provide educational tools and materials. The more experienced may prefer those offering advanced trading strategies.
The process of signing up will be similar, regardless of which broker is chosen. You will normally be asked to provide your details and to verify your identity.
You can then add money to your account and begin trading stocks and other financial assets, including Amazon (AMSN) shares.
Anyone wondering how to buy Amazon stock without spending a fortune could consider a brokerage that deals in fractional shares. Some enable you to invest for around $1.
4. Buy Amazon Stock
Buying Amazon stock is straightforward. Although the specifics will depend on the brokerage used, it will usually begin by logging into your account.
You’ll then search for Amazon, usually by its ticker symbol AMZN, and decide what order you’d like to make.
This is normally either a market order, which buys or sells shares of a stock at its current price, or a limit order that enables the transaction if it reaches a specific level.
5. Track Your AMZN Investment’s Performance
Don’t be tempted to forget all about the stock holding once you’ve made your decision to buy. It will be up to you to monitor its performance.
There are several ways to gauge how it’s doing. For example, you can keep an eye on the closing price each day and then understand what could have been behind the moves.
You should also pay attention to company announcements, such as the quarterly results, as these will share key financial information, such as revenue and profit figures.
They will also include comments from senior management figures about the state of trading and their plans for the future.
By keeping your finger on the company’s pulse, you’ll be able to spot negative trends early enough to get out of the stock before the price crumbles.
Similarly, you may be ahead of the pack in identifying positive trends that could cause the stock price to rise and decide to increase your exposure.
How to Sell Amazon Stock
You may decide that you no longer want to hold Amazon stock. For example, you may no longer believe its longer-term prospects look so attractive.
This could be due to a new competitor, a change within the management team, or a general decline in demand for its services.
Of course, you may want to sell AMZN stock for positive reasons. Its price may have increased so rapidly that you decide to take some profits while you can.
If you decide to sell AMZN stock, you’ll simply need to contact your brokerage – or log in if it’s an online operator – and confirm how much of the stock you want to sell.
How to Invest in Amazon Through Investment Funds
An alternative way of getting exposure to Amazon is through an investment fund that pools together money from thousands of individuals. There are active and passive funds.
The managers of active funds will make asset allocation calls, choose individual securities, and try to outperform the broader stock market.
You would need to find out if a particular portfolio held AMZN stock. As it’s such a large company, it will usually be in large-cap US or technology-focused funds. According to Fintel, there were more than 1,000 mutual funds, including Amazon stock, as of March 2024.
Passive funds, meanwhile, track the performance of a particular sector or index. For example, a fund tracking the performance of the Dow Jones Industrial Average will have exposure to Amazon.
You can access most funds either through a brokerage or directly from the investment house that has made it available.
Amazon Stock Splits and How They Affect Investors
Amazon has carried out four stock splits, according to CompaniesMarketCap. It stated:
“One AMZN share bought before June 2, 1998, would equal 240 AMZN shares today.”
The company underwent a 2:1 split in 1998 and 1999, as well as a 3:1 split also in 1999. The most recent split was 20:1 and happened in 2022.
Stock splits happen when companies increase their outstanding shares to make the stock more affordable to investors, according to Hartford Funds. It stated:
“Instead of a stock trading at $1,000 per share, a 10-for-1 stock split would allow it to trade for $100 per share while the number of held shares would increase tenfold.”
This means stock splits make it easier for investors to buy shares at a lower share price while also helping companies broaden the number of shareholders.
“Stock splits have no tangible impact on a company’s total value—they simply create more shares at more affordable prices,” it added.
Amazon Dividends
If you’re interested in investing in dividend stocks, Amazon might now fit your goals. Amazon has never paid a dividend. It has preferred to invest in growing the overall business.
However, according to an analysis from a team of Goldman Sachs equity analysts led by David Kostin, as reported by Morningstar in February 2024:
“Fellow Magnificent Seven members Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN) are well positioned to introduce dividends of their own this year.”
The Bottom Line: Should I Invest in Amazon Stock?
Amazon is one of the most instantly recognizable companies on the planet – and a popular choice for many individual investors and fund managers.
If you are considering whether to invest in Amazon, you need to decide if the company’s prospects match your longer-term aims and ambitions.
For example, is it likely to maintain a strong position in its sector? Will the share price rise over the coming years? Does it face a lot of potential competition?
If you like the Amazon story, you’ll need to decide whether to buy individual AMZN shares in the company or get more diluted exposure via an investment fund.
Do your own research and always remember your investment decision depends on your attitude to risk, your expertise in the stock market, the spread of your portfolio, and how comfortable you feel about losing money.
The information in this guide does not constitute investment advice and is meant for informational purposes only.
FAQs
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References
- AMAZON.COM ANNOUNCES FOURTH QUARTER RESULTS (S2.q4cdn)
- aboutamazon (Ir.aboutamazon)
- aboutamazon (Ir.aboutamazon)
- aboutamazon (Ir.aboutamazon)
- Top 1,004 Mutual Funds with AMZN / Amazon.com, Inc. (NasdaqGS) (Fintel)
- Stock split history for Amazon (AMZN) (Companiesmarketcap)
- Amazon-IRS-Form (S2.q4cdn)
- 10 Things You Should Know About Stock Splits (Hartfordfunds)
- Alphabet, Amazon likely to follow Meta by introducing first-ever dividends in 2024 (Morningstar)
