Amazon is the largest and most successful retailer in the western world. But it’s not only that – Amazon is also one of the few trillion-dollar US companies that publicly offer stocks. The good news for investors is that they can do everything online.
While we do not specifically advise buying Amazon shares, we want to give you a detailed explanation of what this process entails. With this article, you’ll be armed with knowledge on how to approach Amazon investing as a beginner. And then it’s up to you to decide whether buying these shares is a good choice for you.
Today Amazon is a leading e-commerce, logistics, payments, hardware, data storage, and media company. It dabbles in many other industries. Its history dates back to 1994, and since this time, it’s successfully dabbled in many industries and services.
The company is listed on the NASDAQ and is traded as AMZN. Below is a table containing a short profile on Amazon.
|Services||Amazon.com, Amazon Alexa, Amazon Appstore, Amazon Music, Amazon Prime, Amazon Prime Video, Amazon Web Services|
|Products||Amazon Echo, Amazon Fire, Amazon Fire TV, Amazon Fire OS, Amazon Kindle|
While Amazon.com started as a bookseller, Jeff Bezos always intended to grow further into other niches. His main goal was to make it a technology company, which could solve the issue of online transactions for consumers.
Financial journalists and analysts met this strategy with criticism, even famously calling it Amazon.bomb. However, the effort paid off in the final quarter of 2001. The lack of company profits changed to overwhelming success. However, Amazon was involved in a massive controversy. It famously paid no federal income taxes in 2017 and 2018, despite recording several billion dollars in profits each year.
Buying Amazon Shares: Step-by-Step Instructions
Becoming a legitimate Amazon shareholder isn’t that complicated. The good thing is that whether you’re buying AMZN or shares in another company, the process is largely the same.
Step 1: Find a Good Online Broker
You need to find an online broker that has access to a wide variety of exchanges and possibly multiple markets. Needless to say, you need to look specifically for NASDAQ. Otherwise, you won’t be able to purchase what you want.
Another important thing is that your broker should match your individual requirements. For example, not all brokers accept Australian residents. Or the terms might be set up against you – such as super high prices for low transaction volumes.
Take into account the following factors when you decide on a particular broker:
- Number of options and underlying assets – While you’re mainly interested in the Amazon stock, you want to have other options. The best portfolio is a diversified one. So, after you buy AMZN, you’ll want to work with other assets or enter different markets.
- Deposit and withdrawal options – Make sure a broker offers the payment method you feel the most comfortable with to transfer your funds. It could be bank wire transfers, credit cards, or an eWallet service.
- Demo account and introductory bonuses – A demo account will give you a general idea of what the platform is like. This is essential before you invest real money. As for the bonuses, they range from monetary bonuses to e-books and training courses.
- Reputation – Was it ever involved in controversies? Are there issues with withdrawals or bonuses? Look for online customer reviews and lists of the top brokers in Australia.
- Customer service – There is always a slight chance that something could go wrong. For example, if you have trouble with depositing money or opening a trade, you’ll need assistance quickly.
- Platform security – Look for robust encryption, secure servers, and access control. Overall, it should have a good balance of security requirements vs. ease of use.
Step 2: Open Your Brokerage Account
Opening an account in a broker platform is quite similar to opening a bank account. The biggest difference is that it’s fully online. Usually, it’s very quick, and you don’t need to submit identification documents or proof of credit. But with some firms, it might take a few days until they run a background check on you.
Step 3: Deposit Money to Your Account
Loading up your account with money is even easier than opening an account. Most traders fund their trading accounts with a credit card, which is the fastest way. But we’ve briefly mentioned that there are many other convenient ways to deposit funds.
Also, look for a broker that doesn’t charge you for depositing money. If anything, the broker actually benefits from you making more trades (since there are usually fees for opening trades).
Step 4: Buy the Amazon Share
At this point, you have the account, the cash, and the share target. Open your account, search for the Amazon stock, and press buy. Obviously, there are some intricacies with this process, but executing the buy order is essentially as easy as buying anything online.
When placing an order, you can choose from different order types, such as:
- A market order, which is executed as soon as you place it. With this option, you prioritize time and the purchase of an asset at the best available price. The main drawback is that you risk missing out on a better price for the sake of urgency.
- A limit order prioritizes price over speed. You’ll need to set a specific price or higher at which the stock will be bought or sold. This option ensures a better price, but there is a risk that the order won’t be fulfilled.
Step 5: Review Your Amazon Position Regularly
As an investor, you need to keep monitoring your positions. This is an essential part of any good investment strategy. If you are investing in Amazon short-term, you can use trading tools to figure out the best time to sell or manage your losses. For example, set the target price to sell the stock or use the stop-loss.
Long-term investors should keep an eye on big company events. For instance, you can participate in annual meetings and go through reports with any relevant news and information about Amazon.
Ways to Buy Amazon Shares in Australia
Amazon shares aren’t listed on the Australian Exchange (ASX). It means you won’t be able to buy them directly. That said, there are a few ways to buy Amazon stock in Australia:
- Use a broker – Online brokerage platforms are the easiest way to purchase AMZN as an Australian. This could be a US broker, but, preferably, it should be a local broker that offers international stocks. The trading terms are different, and depending on your broker, you might even have an opportunity to buy a fractional share of Amazon.
- Invest in an ETF – An Exchange Traded Fund (ETF) is made up of multiple stocks. ETFs are bought and sold like a company stock when the stock exchanges are open at a separate ticker symbol.
- Via a Managed Fund – Actively managed funds have a manager who seeks to outperform the market. They are similar to ETFs, but managed funds can be accessed directly from the manager, or through intermediaries such as financial advisers and platforms, rather than behaving in the same way as regular shares.
Why Buy Amazon Shares?
The chain of Amazon’s successful venture has captured the interest of many investors. What makes this company a good option for investment even in the face of economic uncertainty? Here are several reasons:
- Amazon is one of the most valued businesses in the world, with a $1 trillion valuation.
- It stays strong in spite of any financial crisis.
- Online retail and cloud businesses are still young.
- The customer base is very loyal.
- Prime usage is rising.
- AWS is the cloud leader.
- Revenue trends have been positive for over a decade.
Why Amazon Shares Aren’t the Best Choice
Despite having impressive strengths, Amazon is still not foolproof. Cons of buying AMZN stock are:
- The company is a result of only one person’s vision and leadership.
- Microsoft’s (MSFT) Azure is gaining momentum against AWS.
- The complexity of all organization’s moving parts can become a liability in the future.
- Might not be as profitable as the most recent quarterly report suggests.
- Faces increased regulatory and taxation scrutiny.
How to Become a Better Investor
Simply knowing how to buy Amazon shares isn’t enough to make you a successful trader/investor. Before you make any substantial profit, you will need to learn a lot. It includes not only studying the ins and outs of the financial world but also your personality and style. On top of that, trial and error are required to gain real experience.
What can we recommend? While there is no one-size-fits-all approach, we can give the following tips, which will suit most traders:
- Spread your investments – You may already be fed up with financial advisors preaching about portfolio diversification. The Amazon stock looks promising, but it’s best to blend different investments in a single portfolio.
- Learn the term “dollar cost averaging” – This is the system of regularly procuring a fixed dollar amount of Amazon shares. This ensures that your overall investment strategy is more conservative and less susceptible to a market crash.
- Don’t chase performance – A common mistake novice traders make is quickly moving from one investment to another. In this case, you risk selling out of the market after the market has fallen and re-entering it after it has turned around. Unfortunately, this approach will cost you money.
- Ask questions – Don’t blindly hand over your money to a broker, fund manager, or anyone else. Even if you feel you’re not experienced enough to make investment decisions, that’s an even bigger reason to be actively involved.
- Keep your emotions in check – Rely on your research and trustworthy methods of analysis rather than giving in to momentary stress. Also, resist the urge to check your portfolio too often (unless you want to take an emotional roller coaster ride).
- Remember that luck and skill are not the same things – It’s easy to think that buying shares is a similar process to a lottery. However, it takes great skill to consistently hit your targets. The market behaves according to patterns – the key is knowing how to spot them and mitigate the risks.
- Be willing to learn – Just having a basic understanding of investments isn’t enough in the long-term. You may be lucky enough in the beginning, but as the market shifts and new problems arise, you should always work on deepening your knowledge.
It’s a nerve-wracking possibility that you might buy an overvalued stock and lose money. There’s heated debate on whether Amazon is one of those companies. The current situation shows that Amazon’s future growth is very likely to continue.
But as you may know, predicting future performance based on the past is not always a good idea. Use our tips, analysis, and other online resources to determine how much to purchase and when. And remember that buying a stock like Amazon can be exciting, but that you won’t achieve success overnight.