Amazon has been a success during the pandemic. It is one of few companies with a valuation exceeding $1 trillion. Investors were already questioning whether to buy Amazon stock. But interest spiked on March 9, when Amazon announced a 20 for 1 stock split.
What this means is that Amazon investors who currently own shares will be able to purchase 20 shares per share, while their total value remains unchanged. Shares of the stock will be less expensive for new investors. Before the stock split, Amazon stock was trading in excess of $2,000; it is now trading in the low three figures. After the split announcement, Amazon stock prices soared by more than 5%.
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Amazon’s success stems from its ability to make it simple for customers to buy products online, whether they are buying impulsively or quickly. Amazon.com is just as easy to invest in stocks as it is for Amazon.com. Here are the things you should consider before buying Amazon stock.
1. Amazon’s investment potential
While it is appealing to own shares of a company with whom you have a lot of contact, what you know as a customer about the company doesn’t always translate into knowing it as an investor.
Nerdy tip from Amazon: Amazon’s stock symbols is AMZN. The company was incorporated in May 1997 for $18 per share.
You shouldn’t base your decision to buy-or-not-tobuy on a stock’s past performance or current prices. Instead, you should focus on Amazon as an investment and the important step of reviewing its merits. It includes looking at the company’s management, revenues, and earnings as well as the competition.
Apart from these factors, you need to think about whether Amazon stock is the right investment for your portfolio. Your financial situation, your current holdings, and your investment goals will all play a role in the answer. We now have…
2. Do you want Amazon stock in your portfolio?
Amazon’s stock price is available by searching for its trading ticker, AMZN. This can be done on any financial website or through your broker online.
Before you commit, consider:
Diversification is possible. Individual stocks are often considered risky due to their lack of diversification. Your portfolio may also be affected if your company experiences a difficult time. Low-cost mutual funds, such as index funds, are often used by investors to help offset that risk. These funds track a specific market index and invest across many companies, including Amazon. This allows you to diversify and reduce your risk of losing your investments.
Your future investment plans. It is a smart idea to invest on a regular schedule. This strategy is known as dollar-cost average. It is a way to invest a set amount at regular intervals rather than investing a lot of money at once in the stock market or Amazon. Dollar-cost average can be used to make sure you don’t buy stocks and other investments at a high cost.
3. Amazon: How much do you need to invest
It is important to determine how much money you are able to invest in Amazon stock.
Your financial resources won’t always be the deciding factor. The stock market is considered a long term investment. Financial experts advise against investing in any stock that will require money within five years.
You should ensure that you have enough money for an emergency fund, and that you are saving for your short-term goals. Here are some tips on where to save money for your short-term goals.
You might also be interested if fractional shares are a good choice if you’re just starting out in the stock market, or you have limited funds to invest. This allows you to purchase a part of a share based on how much you wish to invest and not the entire thing. While fractional shares may not be available from all online brokers, this option is growing in popularity.