How to Invest in Amazon

Amazon has been one of the most impressive high growth stocks. Is it right for your portfolio? Learn how to invest in Amazon, even with as little as $1.

Amazon is one of the highest priced stocks available on U.S. exchanges.

Luckily these days, the barrier to the stock market has never been so low. There are lots of investment apps that allow you to buy stocks with just a few dollars.

Founded in 1994, Amazon started as an online bookseller service, and is now a global powerhouse offering a whole range of services. It went public on May 15, 1997, on NASDAQ (ticker symbol AMZN). Since then, it has seen incredible consistent growth.

Here's a step-by-step guide of how to buy Amazon stock. We'll also talk about some factors to consider before investing in a company.

1. Find the Right Online Brokerage

Amazon stock is listed on the NASDAQ Stock Exchange. Make sure the brokerage you use has access to this exchange. Just about all U.S.-based brokerages offer access to the NASDAQ market.

When choosing a stockbroker, consider these factors:

• Minimum opening deposit
  
• Trading commissions and other fees
  
• Level of service, account types, and other products
  
• Does it support fractional shares?
  
• Will you be trading actively or buy-and-hold?
  
• How much research do you need?

Luckily, most major brokerages have eliminated trading fees. However, some apps may have a small monthly fee for using the service.

If you're a beginner without a lot of money to invest, fractional shares will be important. This lets you purchase just a tiny share of a stock. Not all brokers support this.

	Robinhood	M1 Finance	Webull
	OFFER Get a Free Stock (worth between $5 and $200) - Learn More	SPECIAL OFFER M1 Investment Account - Up to $500 Bonus - Learn More	SPECIAL OFFER $75 Account Transfer Bonus - Learn More
	Benefits and Features
Stock Trading	$0	$0	$0
Minimum Deposit	$0	$100	$0
Fractional Shares	Yes	Yes	Yes
Good For	Beginners; Active traders	DIY investing with passive portfolio management	Experienced investors; Active traders
	Get a Free Stock (worth between $5 and $200) Commission-Free Trades Commission-Free Options Investing	M1 Investment Account - Up to $500 Bonus Transfer and Earn Up to $10,000 Commission Free Stock Trading	$75 Account Transfer Bonus Get Started Up to $100 Transfer Fee Reimbursement
Robinhood: Pricing information from published websites as of 04/18/2020. M1 Finance: Pricing information from published website as of 02/28/2020

Keep reading for our top recommended brokers to buy Amazon stock.

2. Open and Fund Your Account

After you've chosen your brokerage, it's time to open an account. Usually, you need to provide your name, address, contact info, and Social Security number. There is no credit check for a regular brokerage account.

Next, you will need to deposit funds into your new account in order to start trading. To do so, you will need to link a bank account. Then you can fund your account via electronic transfer from your bank. This usually takes 3-5 business days to clear.

3. Purchase Amazon Stock

Lastly, all you have to do is purchase Amazon stock. Amazon is found under the ticker symbol AMZN. Just search for AMZN in your brokerage platform and input how much you'd like to buy.

There are two types of orders you can execute to place your trade:

• 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 the price you set, the trade will never be executed.

For brokerages that offer fractional shares, you can purchase just a tiny piece if you don't have enough money for a full share. This allows you to still be able to invest in Amazon even if you only have $10 to invest.

Some brokerages don't support fractional shares. In that case, you will need to have enough money for at least one full share.

Is Amazon Stock Right for You?

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

Are you looking for passive income through dividends? Despite being a blue chip stock, Amazon does not pay dividends. Is this something you want?

How much risk can you afford? Remember that stocks can be volatile, some sectors more so than others. Amazon has done extremely well in the past years, but there are also arguments that the FAANG bubble could burst (Facebook, Apple, Amazon, Netflix, and Google). It's best if you can commit to holding your investment for the long term to ride out any downturns.

Pros and Cons of Buying Amazon Stock

Pros:

• Average annual return of 38% over past 10 years
  
• Leader in e-commerce and cloud computing
  
• Constantly expanding services to consumers

Cons:

• Very expensive share price
  
• Soaring prices could also mean large decline
  
• Facing increased regulatory scrutiny as it grows

How to Analyze Amazon's Financials

Before investing in a company, it's smart to do some research. This helps you form a more informed decision on whether the stock is a good buy or not.

It's also smart to take a look at the company's competitors. Amazon's competitors include Walmart, Microsoft, and Alibaba. It's important to compare Amazon's financials and growth against the competition.

Here are some things you can look at to evaluate a stock. Most brokerages will provide a summary of the main numbers for each company, as well as a chart of its historical performance.

• Annual report: Details the company's financial performance, including income and cash flow statements, revenue, and expenses. Most companies will have this for free on their website.
  
• Quarterly financial statements
  
• Profit margin (%): How much profit the company gains for every dollar in sales. The higher number, the better.
  
• Return on equity (%): How much profit the company generates with each $1 of the shareholders' money. The higher number, the better.
  
• Price-earnings ratio (P/E): The company's current stock share price to the company's average earnings per share. Usually, a higher P/E ratio means investors are expecting higher growth.
  
• Debt-equity ratio (D/E): How much debt the company has compared to its shareholder equity. Usually, a higher ratio means more risk to investors. But you have to consider the industry.

How to Reduce Risk

Any stock investment will carry some risk, even if you do your research carefully. The best way to minimize risk is by diversifying your portfolio.

In other words, don't put all your money in just Amazon stock. Instead, spread out your investments into many different stocks. That way, if Amazon's price falls, you'll still have others to carry you through. It's recommended to have 10-20 stocks in your portfolio for diversification.

It's also smart to invest in stocks in different sectors. Amazon is in the Consumer Services sector. To spread out risk, also buy shares of stocks in other sectors like Financial, Healthcare, Technology, etc.

An easy way to reduce risk is by investing in index funds. These funds follow a specific market index (like the S&P 500). One fund contains hundreds of securities, so you're instantly diversified. You can have the majority of your portfolio in index funds, and then just pick a few specific companies to invest in.

Best Brokerages to Invest in Amazon

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

Robinhood
Robinhood is one of the most popular investment apps for beginners. It has no minimum to get started. A big benefit is that it supports fractional shares, allowing you to invest in stocks with as little as just $1.

M1 Finance
M1 Finance is a unique hybrid DIY brokerage and robo-advisor. You choose your own stocks and build your own portfolio. Then M1 will automatically manage it for you at no cost. It also supports fractional shares. The minimum to start is $100.

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.

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. However, it doesn't support fractional shares.

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 from as little as $1.

Bottom Line

Before investing in any stock, it's smart to do research on the company to see if it's a good fit for your portfolio. After that, it's just a matter of finding the right brokerage for your needs. Remember to regularly review your investments to see how they're performing and if you need to make any adjustments to your portfolio.