Investing in Amazon stock is nearly as easy as shopping on Amazon. Here's what to consider before investing, and how to buy Amazon stock.
How to buy Amazon stock
You can buy Amazon stock through an investment account, also known as a brokerage account. You'll need to add money to the account and then search for Amazon stock within the brokerage's platform by searching "AMZN." You can also buy Amazon stock through Amazon's direct stock purchase plan.
» Check out the best brokerage accounts for stock trading
Brokerage firms | |
|---|---|
1. Do your research into Amazon
There’s an understandable appeal to owning shares of a company you interact with regularly, but what you know about a company as a customer often doesn’t equal knowing it as an investor.
Don’t base your to-buy-or-not-to-buy decision on a stock's past performance or current price. Instead, make sure that you understand what investing in Amazon really means. That can include digging into the company's management, revenue, net income and earnings, as well as analyzing the competition. (Learn how to do stock research.)
Aside from those factors, you'll want to consider whether buying Amazon stock is the right decision for your portfolio. The answer depends on your financial situation, current holdings and investment goals.
2. Decide whether you should buy Amazon stock
You can find Amazon's current stock price by searching for the company's trading ticker, AMZN, on a financial information website or through your online broker.
Before you commit, consider:
- How you'll achieve diversification. Financial advisors often stress the importance of diversification, which means making sure that your total investments — your portfolio — aren't exclusively made up of the same types of investments. Investing in only individual stocks is typically considered risky; if the company hits a rough patch, your portfolio will, too. To soften that blow, investors often turn to low-cost mutual funds like index funds to make up the bulk of their investment portfolios. These funds track a market index and invest in many companies — in some cases, that includes Amazon — which makes it easier to diversify your portfolio and lower your investment risk.
- Your future investment plans. In general, it's wise to invest on a regular basis. There’s even a name for this strategy: dollar-cost averaging. It means investing set amounts at standard intervals, rather than putting a lot of money into the market, or into a stock like Amazon, at once. Dollar-cost averaging can help ensure you don’t always buy stocks or other investments at a high price.
3. Consider how much to invest in Amazon
How much you should invest in Amazon isn't necessarily the same as how much money you have available. That's because the stock market is considered a long-term investment, and financial experts typically warn against buying any stock with money you’ll need within the next five years.
Before buying individual stocks, it's also wise to make sure you have an adequate emergency fund and that you're saving for any important short-term goals. (Here are some suggestions for where to save for short-term goals.)
If you're new to the stock market or have a small amount of money to invest, you might also be interested in fractional shares, which allow you to purchase a piece of a share — based on a set amount of money you want to invest — rather than the whole thing. Not all online brokers offer fractional shares, but the offering is becoming more common.
4. Open a brokerage account
Buying Amazon stock requires you to have a brokerage account, and online brokers offer the quickest and easiest ways to start one today. If you don’t have a brokerage account, you can open one in about 15 minutes — the process is similar to signing up for a checking or savings account. See our tutorial on how to open a brokerage account for more details.
If you can afford a single share or more of Amazon, you have a wide range of options. Look for a broker with low or no commissions, excellent customer service and useful tools and resources.
If your heart is set on Amazon and you can’t afford to buy a full share at the current trading price, look at brokers that offer those fractional shares mentioned above. That will allow you to buy a portion of one share of Amazon to get started.
5. Buy Amazon stock
Once you have a brokerage account and you've decided how much to invest, it’s time to buy Amazon stock.
A stock’s price can fluctuate throughout the day, but you shouldn’t get too hung up on getting the lowest price to the penny — more on that below.
When you’re ready to buy the stock, you’ll do so through your online broker's website or trading platform. You'll be asked to choose an order type, which determines when and how your order to buy Amazon stock is executed.
Most brokers offer a range of order types, but you'll generally be fine if you stick to two choices: a market order and a limit order.
- A market order executes ASAP. It is generally a good choice for long-term investors. The price you pay for the stock may vary slightly from the price you see when placing your order, because a market order prioritizes time: It is executed as quickly as possible at the best available price.
- A limit order is a good choice for investors who prioritize price over speed. In other words, you can tell your broker to only execute your trade when the stock price hits a specific price you've set. Limit orders are helpful during wild market swings, but the risk is that your order may not get executed in full or at all.
Whether you're buying Amazon stock or shares in another company, the process is generally the same. Consult our full guide on how to buy stocks to learn more.
» View our list: The best-performing stocks
Neither the author nor editor held positions in the aforementioned investments at the time of publication.
