How To Invest in Amazon: Guide to Buying Stock

Amazon is one of the largest companies in the U.S. stock market (and the world), making it a common addition to many investment portfolios. Founded by Jeff Bezos in 1994, it has since grown into one of the world’s most prolific retailers and a force in the trading world.

There are several ways to invest in Amazon stock, including through individual shares, fractional shares, and index funds. And as long as you have a brokerage account, you can invest in this company. But despite its popularity, I don’t recommend Amazon as an investment for everyone, especially investors who prioritize income investing. Before buying Amazon stock, consider your investment goals and overall portfolio.

Here’s a step-by-step guide to investing in Amazon stock, including its cost, alternative ways to invest, and whether it’s a good investment in 2024.

How to buy Amazon stock

It’s relatively easy to buy Amazon stock with these steps.

1. Open a brokerage account

The easiest way to purchase stock in Amazon is with a brokerage account. There are plenty of online brokerage firms that take just a couple of minutes to open an account and start investing with. Additionally, many of the best brokers offer commission-free trading, which means you can buy Amazon stock without extra fees.

To sign up for your account, expect to be asked for your personal information, including your Social Security number or another tax ID, as well as your contact information.

2. Research your investment

It’s important to research any investment before purchasing. While you might be familiar with Amazon as a retailer, it’s worth learning more about Amazon as a stock, including its past stock performance, current stock price, dividend payments, and more.

Amazon and all other publicly traded companies are required to file certain financial statements each year. You can find Amazon’s statements by searching the Securities and Exchange Commission’s (SEC’s) EDGAR tool.

3. Decide how much to invest

Consider your budget for your Amazon stock investment. When deciding how much to invest, think about your personal spending plan and how Amazon stock would fit into your overall investment portfolio. If you have $100 monthly to invest, you may divide that money between multiple companies and funds, including Amazon.

Alternatively, you might decide that Amazon isn’t enough of a priority for you right now based on how much you have to invest or that you want to go all in on Amazon.

The good news is that even if you can’t afford to buy an entire share of Amazon’s stock, many brokers allow you to buy fractional shares. When you buy fractional shares, you’re buying just a portion of one share at a portion of the price. For example, if a stock was priced at $100 and you wanted to buy half a share, it would cost you $50.

4. Place your buy order

The final step of buying your Amazon stock is to make your purchase. Once you’ve opened your brokerage account, you can navigate to the trading hub where you purchase individual assets.

From there, you’ll be able to search for Amazon’s stock using its ticker symbol AMZN. You can then indicate the type of buy order to place. The two most common options are market orders and limit orders. Here’s how each one works:

• Market order: Executes as quickly as possible at the best available price. There’s no guarantee of the price at which your order will be executed.
• Limit order: Executes with a maximum price limit. If the stock price rises above that limit, your order won’t be placed.

How much does it cost to buy Amazon stock?

As of midday on November 5, 2024, Amazon’s stock price was trading at $199.27.

Amazon’s stock currently trades for considerably less than it did just a few years ago. In June 2022, Amazon completed a 20-for-1 stock split. In order words, each share of Amazon stock was split into 20 new shares. This didn’t reduce the value of any investor’s holdings but significantly reduced the stock price, making the stock more affordable. It was trading for nearly $3,000 just before the split.

Remember that if you can’t afford to pay the nearly $200 required for a share of Amazon stock, you can instead buy fractional shares. While the process and requirements vary by broker, you can often buy as little as $1 in fractional shares of stocks and ETFs.

Buying Amazon stock with index funds

If you’re uncomfortable buying individual Amazon shares, you can invest in the company through index funds, including mutual funds and exchange-traded funds (ETFs).

Index funds are diversified funds with many underlying assets that track the performance of a particular stock index or part of the stock market. As one of the top five largest stocks in the world by market capitalization, Amazon is included in many different index funds. For example, it’s an important part of both S&P 500 funds and total stock market funds.

You can also find Amazon in many sector-specific funds, including consumer discretionary index and large-cap growth funds.

Who should invest in Amazon?

Anytime you evaluate a stock, you’ll have to decide whether it’s the right investment for you and your personal finance goals. One of the hazards of investing is always that you can lose money, and it’s essential to consider ways to mitigate your risk while maximizing your portfolio for returns.

Investors seeking diversification

Amazon is one of the largest companies in the world, making it a solid investment choice for many investors. Given its growth potential, it’s a particularly good addition to a diversified portfolio. For example, if you’re investing in index funds or building a diversified portfolio through individual stocks, there’s a good chance you’ll want to include Amazon.

On the other hand, Amazon probably won’t work for you if your goal is income investing. Amazon has never paid a cash dividend (a portion of the company’s profits paid to eligible shareholders). It doesn’t appear that Amazon is likely to adopt a dividend soon, so it’s a better option for investors focused on long-term growth rather than short-term income.

Stock traders

Finally, it’s important to consider your comfort level with investing in individual stocks, including Amazon. Investing in individual stocks and trading opportunistically opens you up to more risk than investing in a diversified portfolio. After all, if you only invest in Amazon and the stock performs poorly, you won’t achieve your desired returns. However, some investors see individual stock investing to try to beat the market as worth it.

FAQs

Bottom line

With the range of online brokerage accounts available and relatively low trading prices, investing in Amazon stock is easier than ever. Once you’ve opened your brokerage account, you can place an order in a matter of minutes.

While Amazon is one of the largest companies in the U.S. stock market and has helped make plenty of investors rich, it’s important for each person to decide whether it’s a good addition to their portfolio. One of the most critical questions is whether you’ll invest in individual stocks or diversified funds. From there, you can decide whether Amazon has a place in your portfolio.

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