Introduction
Amazon is one of the biggest companies in the world, with a market cap of over $1.5 trillion. What started as an online bookstore back in 1994 grew to become the second company to cross a trillion-dollar market cap in 2018.
Hold on to your FOMO, you’re still not late to catch the Amazon ride.
Highlights and Key Takeaways
- Amazon is one of the biggest retailers in the world that has diversified into web services, content, and other areas.
- Amazon reported a profit of $33.4 billion in 2021 and a loss of $2.7 billion in the subsequent year.
- For the longest period, Amazon has outperformed the S&P 500 in terms of growth.
Understanding Amazon as an Investment
Why Invest in Amazon?
Amazon is one of the fastest-growing companies in the world. The retailer’s stock AMZN grew 63% in 2023 alone, beating the S&P 500 with a steep margin. Amazon was also miles ahead of its fierce competitor and the largest retailer, Walmart.
Amazon is a highly diversified company that operates in multiple markets. The company makes money through its retail, web services, and subscription channels. AWS, being the biggest cloud service provider has seen a proportionate response to the advancement of AI and the increased need for speed and processing powers. This contributes to positive forecasts for the stock price in the future.
Amazon’s e-commerce, AWS, and Prime business creates an exciting investment opportunity for investors in the long term. The company is currently dominating the stock market by being one of the few to be in the trillion-dollar league, becoming one of the best additions to the portfolio among high-cap companies.
Risks Associated with Investing in Amazon
Operating in highly competitive markets, Amazon doesn’t have the liberty to operate with high margins creating an aspect of risk associated with investment in AMZN.
The company reported a net income of $33.4 billion in the year 2021 after which it suffered a loss of $2.7 billion in the following year. These losses were mainly due to the investment into Rivian Automotive whose share price plunged more than 80% in the year. Apart from that, the inflation rate hike also caused a rise in expenses for the company seeing lots of improvement in the year 2023.
Overall, even with high net sales, the company fails to translate numbers into profits in some cases which creates volatility in the share price as well.
How To Buy Amazon Stock
Choosing a Brokerage
Be it Amazon or any other stock that you need to buy, the first step is to find the right broker for you. This includes researching to find platforms with the best platform usability, low trading fees, and the best customer service. Typically, choosing the right platform requires looking at the following aspects:
- Features: Users generally prefer a feature-loaded platform that offers demo accounts, retirement accounts, secure sign-ups, real-time quotes, and analysis tools. While the best feature set for you is entirely subjective based on your needs, the best approach is to test the platform and see customer reviews before committing.
- Regulation and security: Security is of utmost importance. So, checking to see if the broker is regulated is a non-negotiable part. Is the brokerage regulated? Does it have policies for solvency? Is there insurance protection? You need to ask these questions before registering with a stock brokerage.
- Fees: Check to see if the deposit minimums, trading fees, margin rates, and any associated charges to compare platforms. Since maximizing profits requires minimizing costs, the platform fees are a good indicator of whether or not you want to pick a brokerage. Although you can find aPLACEMENT_11 with no trading commissions, the services available may be limited.
- Customer service: Platforms that provide transparency, education, and good customer service are loved by their users. Remember to check the platform reviews to find feedback and comments related to these qualities.
Placing a Stock Order
Once you’ve researched your preferred brokerage and registered an account, the next step is to place an order for Amazon shares. The company’s stock can be found by typing in the stock ticker “AMZN“. This is where you are required to enter the number of shares you want to invest in. This requires prior research of your investment and risk appetite depending on your goals.
Lastly, it is important to select the type of order you want to make. Generally, there are two order types, market order and limit order.
- A market order allows you to buy the stock at its current price in the market.
- A limit order allows you to set a desired price and the trade executes only when the share reaches that price.
Monitoring Your Investment
Understanding Stock Performance
Now you know how to buy Amazon stock, ensure you monitor its performance by conducting a AMZN technical analysis. This entails assessing the AMZN chart, which generally shows how the stock price moves over certain time frames like days, weeks, months, or years. The chart comprises the y-axis and the x-axis, which track the stock’s prices and time periods, respectively.
You may want to note the entry price of your investment, after which you can periodically monitor the line charts to see the difference. To see if this investment is performing well, you can also compare it to industry benchmarks like the S&P 500 or Dow Jones. For example, the graph below shows the performance of AMZN (Blue) compared to the S&P 500 (Cyan).
You may want to note the entry price of your investment after which you can periodically monitor the line charts to see the difference. To see if this investment is performing well, you can also compare it to industry benchmarks like the S&P 500 or Dow Jones. For example, the graph below shows the performance of AMZN (Blue) compared to the S&P 500 (Cyan).
Keep track on AMZN news Review the company’s annual financial reports to analyze the yearly performance, cash flows, opportunities, and risks associated with the investment. Don’t forget to monitor AMZN’s investor relations. This will give you more insight into Tesla’s strategic plans, governance, etc, so you can make informed investment decisions.
A combination of understanding the fundamentals of a company and the technical analysis can give you a clear picture regarding whether you should hold or sell the stock.
When To Sell Amazon Stock
The best investment advice that you can get is to not sell out of fear. Stick to your strategy and try not to be reactive to market short-term corrections. However, it is still essential to know when to pull out to take profits or cut your losses.
- Portfolio rebalancing: At times, after a particular company has been performing well, it starts to account for the majority of your portfolio. This can be a logical time to sell some of the portions to avoid too much exposure to a single company in your portfolio.
- Liquidity requirement: Emergencies can’t be forecasted. Sometimes you need the money and you may sell your shares to get quick access to funds. This isn’t the best practice and you should always have an emergency fund.
- Disproportionate valuation: Sometimes the company’s valuation doesn’t reflect the business. Due to an overly optimistic market, the stock gets overvalued. This is where you need to be vigilant and sell.
- New opportunities: You may find better opportunities that can give you higher returns than your current investments. However, this should be done solely based on analysis and data and not on emotion and greed.
How To Sell Amazon Stock
Selling an Amazon stock is as simple as buying it. Simply type in the company’s ticker, AMZN, and place a sell order. Sell orders work similar to buy orders and you’ll find the option to sell by placing a limit or market order here as well.
How To Invest in Amazon with Funds
As discussed previously in this article, investing in Amazon stock has its risks and opportunities. Luckily, there are ways to invest in Amazon without having to put all your eggs in the same basket. This is where index funds come in.
Index funds contain a collection of stocks diversified across different industries. Being one of the most popular companies, Amazon is easy to find in these funds. For example, the company amounts to 3.5% of the S&P 500.
Conclusion
Amazon’s stock has been an overperforming asset since its IPO. AMZN has outperformed the S&P 500 and other notable index funds which has made it a lucrative investment over the years. However, it is still necessary to do your due diligence by looking into the fundamentals before making such decisions.
Make a plan of investment according to your goals and find a suitable brokerage that helps you translate these goals into action. Lastly, learn how to analyze company fundamentals to help monitor the performance of the stock and make data-driven decisions. Try to eliminate emotions before buying and selling even if it creates discomfort at first.
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
FAQ
Is Amazon a Good Stock To Buy?
While “good” varies from case to case depending on the investment goals and risk tolerance, Amazon is generally considered a good investment. The technical indicators suggest that it is a good time to buy the stock.
Can I Buy Amazon Stock On My Own?
Yes, investors can buy Amazon stocks on their own. Online brokerages and trading applications have made it incredibly easy to buy and sell stocks of your preference.
What is The Best Stock to Buy Right Now?
The best stocks to buy can be found by comparing companies to industry benchmarks like the S&P 500 and other high-performing assets. Considering this, Investing.com has rated the following stocks as good buys:
1. Semler Scientific (SMLR)
2. RCI Hospitality Holdings (RICK)
3. Academy Sports Outdoors (ASO)
4. Chesapeake Energy Corp (CHK)
5. Harmony Biosciences (HRMY)
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