October 14, 2023

How to Buy Microsoft Stock

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You want to take advantage of Microsoft's 48-year success in the industry? Here's our step-by-step guide on how to buy a Microsoft stock.

Microsoft has shown itself to be a solid investment. Microsoft's investment in OpenAI and ChatGPT has also created excitement and raised its profile.

You may even be looking at Microsoft as an indirect investment to ChatGPT. If you want to invest in Microsoft, you've come to the right place! This guide will walk you through the essential steps and tips.

Let's explore how you can potentially benefit from Microsoft's success and growth.

Disclaimer: CreditDonkey does not advise you to invest in any particular company. This article merely is just a guide on how you can invest in Microsoft.

Is Microsoft on the stock market?

Microsoft Corp, a prominent multinational technology corporation, is publicly traded on the NASDAQ stock exchange under the ticker symbol 'MSFT'.

Its initial public offering (IPO) took place on March 13, 1986.[1] This IPO was considered by many analysts as "the IPO of the year."

The IPO price was $21 and had risen to $35.50 before the end of the day. It traded an impressive volume of around 2.5 million shares.[2] The closing price was recorded at $27.75 per share. From this offering, Microsoft earned a sum of $61 million. This resulted in a market capitalization of $777 million on its first day of trading.

How to Invest in Microsoft

You can buy Microsoft stock using any brokerage or trading app. There are no special qualifications needed.

How would you prefer to buy Microsoft's stock?

Create an Account with a Brokerage

Before you can start investing in Microsoft, you first have to create an account with a brokerage firm or trading app. You can visit the brokerage's website or app and follow the instructions there to set up your account.

Typically, you'll need to provide:

  • Your name
  • Social Security number
  • Address, phone number, and email
  • Date of birth

You may also need to provide a copy of your driver's license or passport to verify your identification.

There are several different account types you can open (note that not all brokerages support every account type):
  • Taxable: A general-purpose investment account
  • Joint: An account shared between two individuals
  • Retirement (includes Traditional and Roth IRA)
  • 529 College Savings
  • Custodial: An account set up for a minor

Don't have a ton of money to invest? Look for a brokerage that supports fractional shares. This will allow you to buy a portion of a share if you can't afford a full share. You will then be able to invest in Microsoft even if you only have $10.

Keep reading to know our recommended brokers for buying Microsoft stock.

Fund Your Account

Once your account is created, you will need to fund it to start trading. Just link it to your bank account so you can deposit money. You should note that each brokerage has a different minimum deposit amount.

Be sure to read through the terms and conditions of the platform before making any investments.

Now, you can start investing in Microsoft.

Once you've funded your account and are ready to buy, search for Microsoft stock using its ticker symbol 'MSFT'.

The company should appear, along with Microsoft's other relevant data such as its current stock price and daily average volume.

Click on the company listing for more detailed information, including news updates and analyst ratings. It's smart to do some research and consider any risks before investing.

Decide How Much You Want to Buy

The next step is deciding how much Microsoft stock you want to buy. Most platforms will let you enter the number of shares or the exact dollar amount you want to buy.

For example, if the investing app allows for fractional shares, you can type in that you want to buy $50 worth of Microsoft shares (instead of full shares).

Once you have entered the details, you are now ready to place your order.

Place your order

After entering all the information, review it one last time and click "Place Order" to complete your purchase of Microsoft stock. Your order will be processed in a few minutes, and you will receive a confirmation once the order placement has been successful.

There are two types of orders you can execute:
  • Market order: Execute the transaction now at the current market price.
  • Limit order: Set a specific price at which you wish to buy. This gives investors more control. But if the stock never hits your price, the trade will never be executed.

After that, you can view your holdings in your account portfolio and track their performance over time.

Best Brokerages to Invest in Microsoft

Here are some of our recommended brokerages to buy Microsoft shares. All these brokerages have no trading commissions.

  1. Robinhood
    Robinhood is one of the most popular investment apps for beginners. It doesn't have a minimum deposit requirement. A big plus is that it supports fractional shares, allowing you to invest in stocks with as little as just $1.

  2. M1 Finance
    M1 Finance is a unique hybrid self-directed brokerage and automated investing. You choose your own stocks and build your own portfolio. Then M1 will automate your strategy. It also supports fractional shares. The minimum to start is $100.

  3. Webull
    Webull also has no trading fees or minimum investment. It offers better research tools and analytics for more experienced investors. It's also a good choice for active traders with free extended trading hours. It also supports fractional shares for most stocks and ETFs.

  4. Stash Invest
    Stash Invest is designed for new investors who need a little handholding. It guides you to pick stocks aligned with your goals and risk tolerance, but you can also choose your own stocks. You can purchase fractional shares. There is a monthly fee starting at $3/mo.

  5. Fidelity
    Fidelity is a great choice if you're looking for a full-service brokerage with a wide variety of account types and other investment products. There is no account minimum. Fidelity also offers fractional shares.

Pros and Cons of Buying Microsoft Stock

Here are some of the advantages and disadvantages of investing in Microsoft:

Pros:

  • Diversified Revenue Streams
  • Strong Leadership
  • Ongoing Government Contracts
  • Market Value exceeds $2 trillion, indicating strong value
  • Growing Dividend Payments

Cons:

  • Intense competition from rivals such as Apple and Google
  • Company's success is closely tied to the performance of the PC market

Why invest in Microsoft?

Investing in Microsoft can lead to long-term growth. The company excels in cloud computing, dominates the PC software market, and stays at the forefront of advanced AI technologies.

  • Strong Position in Cloud Computing
    Microsoft is a pioneer in cloud computing. Investing in cloud computing is a smart choice as it has shown good performance even during tough economic times. It continues to improve though it slowed down in 2022.

    Microsoft plans to grow its Azure data centers in 11 new regions this year. The company is particularly hopeful about the Asian market and seeks to increase its cloud computing in the region.

  • Dominance in the PC Software Market
    Microsoft's operating systems has over 70% of the PC software market share. This shows Microsoft's stability and potential for more growth.

  • Microsoft and ChatGPT
    Recently, Microsoft decided to invest $10 billion in OpenAI. Open AI is the company behind ChatGPT, a famous AI chatbot. This investment adds to their previous $1 billion investment made in 2019, and an additional $2 billion made in 2021. ChatGPT is well-known for its human-like conversation skills and ability to handle multiple tasks.

    Microsoft has been promoting OpenAI's technology. And it plans to incorporate ChatGPT into its cloud services. With the AI market's expected growth, Microsoft's investment in OpenAI puts the company in a strong position for future expansion.

Interested in investing in ChatGPT? Here is a full article on How to invest in OpenAI.

Now let's discuss more about Microsoft's valuation to see if it is a good buy.

What motivates you to consider buying Microsoft's stock?

What is Microsoft's valuation?

Microsoft is currently worth $2.47 trillion, making it one of the most valuable companies. Its price-to-earnings (P/E) ratio is 33.91. This ratio means investors are willing to pay $33.91 for every dollar of Microsoft's earnings.[3]

Microsoft's high P/E ratio reflects investors' belief in the company's future earnings growth, which could be further boosted by its investment in OpenAI.

How to read Price-to-Earnings Ratio (PE Ratio)?
  • Companies with a P/E ratio above 30 are often labeled as "growth stocks." This suggests that investors predict future growth or profitability.
  • A negative P/E ratio means the company is losing money. Some investors may still predict future growth, but this ratio simply means present unprofitability.
  • Positive P/E ratios below 10 are generally regarded as "value stocks" or underpriced stocks. This means investors see the stock price as lower than the stock's intrinsic value. It's like buying stocks at a discount.

Here are two common ways investors measure a company's value:

  1. Market Capitalization (Market Value)
    Market capitalization (market value) is how we measure the size of a public company. We do this by multiplying the current stock price by the number of its outstanding shares.

  2. Price-to-Earnings Ratio (PE Ratio)
    The P/E ratio shows if a company is undervalued or overvalued. A low ratio means the company is undervalued or has high earnings, a high ratio means the company is overvalued, and a negative ratio means the company has heavy losses.

Here's the FY2023 Q4 Summary Report of Microsoft:[4]
  • Revenue of $56.2 billion, 8% increase
  • Operating income at $24.3 billion, 18% increase
  • Net income was $20.1 billion, 20% increase
  • Diluted earnings per share were $2.69, 21% increase

    Note: The increase/decrease is in comparison to the 2nd quarter of the last fiscal year.

Don't make the buy-or-not decision based on the stock's price alone. Instead, consider if Microsoft is the right fit for your goals and risk tolerance. This comes down to what kind of investor you are.

Are you looking for a passive income and considering a stock that has dividend shares? Microsoft has a quarterly dividend of $0.75 per share as of September 2023[5] and an annual dividend yield of 0.84%.

This is more fitting for a long-term investment. While the dividend yield may not be high, Microsoft's consistent dividend payments can be appealing to long-term investors. Especially those who prioritize stability and the potential for capital appreciation over immediate high yields.

Are you having second thoughts on Microsoft stock? Or do you simply want to diversify your portfolio? Try also investing in Apple, Google, or NVIDIA. Here's a quick review of these companies.

What's your biggest concern about investing in Microsoft stock?

Alternatives to Microsoft Stock

Here are other competitive companies in the technology industry that are worth looking into:

  1. Apple (NASDAQ: AAPL)
    Apple Inc. is a renowned tech company that sells consumer electronics such as iPhones, iPads, Mac computers, and wearables. It also offers services like Apple Music and iCloud. With a strong brand presence and a devoted customer base, it's a top pick among investors.

  2. Google/Alphabet (NASDAQ: GOOGL)
    Google's parent company, Alphabet Inc., is a worldwide technology firm that specializes in internet-based products and services. While Google is renowned for its powerful search engine, it also provides various services, including Google Maps, YouTube, and Google Cloud.

  3. NVIDIA (NASDAQ: NVDA)
    NVIDIA Corporation is a prominent player in the graphics processing unit (GPU) and artificial intelligence industry. The company specializes in designing and producing GPUs that are widely utilized in gaming, professional visualization, and data centers.

    Additionally, NVIDIA has made noteworthy strides in AI technology and offers solutions for autonomous driving and data analytics. Its stock has shown a strong performance in recent years due to the growing demand for their products.

Bottom Line

It's important to remember that investing involves risks, and the stock market can be unpredictable. While Microsoft may seem like a promising investment, it's always advisable to do thorough research.

Consider your own financial goals and risk tolerance before making any investment decisions.

References

  1. ^ Microsoft. FAQ: When was Microsoft's initial public offering (IPO)?, Retrieved 9/17/2023
  2. ^ Microsoft. Microsoft goes public, Retrieved 9/17/2023
  3. ^ Nasdaq. MSFT Price/Earnings & PEG Ratios, Retrieved 9/18/2023
  4. ^ Microsoft. Earnings Release FY23 Q4, Retrieved 9/17/2023
  5. ^ Microsoft. Dividends and Stock History, Retrieved 9/17/2023

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