How to Buy Amazon Stock – Investing & Trading Guide
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How to buy Amazon Stock? Our easy-to-follow investing and trading guide explains step by step what you have to do to become an Amazon shareholder.
See Also: Top 10 Best Stocks to Buy Now
5-Step Plan: Buying Amazon Stock
Step 1: Find the best brokerage account
Shares are traded on a stock exchange, and an investor needs a brokerage account to buy and sell shares. The best trading account is the one that enables you as an investor to place buy and sell orders, hold positions and manage your portfolio with low fees. For U.S. markets, I like Charles Schwab and E*Trade. Both brokerage firms are listed on a stock exchange, and their financial status is transparent.
If you consider day trading Amazon shares, you better choose a direct market access broker where you benefit from fast order executions, order routing options, and a substantial easy-to-borrow short-sell list. The best day trading broker is Cobra Trading.
Step 2: Open your brokerage account
Once you find your preferred online broker, it’s time to open an account. Fortunately, the time of tremendous paperwork belongs to the past and opening a account can be done quickly these days. Fill out the online forms, and add the legal documents required for identification.
Step 3: Fund your brokerage account
Great work! You successfully opened your account with your favorite company. Before you can start investing, it’s necessary to deposit money. Consider the minimum account balance required by your broker before funding the account and transfer the minimum balance or more. It is like a regular bank wire, but the money will be credited to your trading account instead of a checking account. Be aware that day trading stocks in the United States require a minimum of $25,000 of maintained funds if you want to day trade more than three times per 5-day period.
Step 4: Buy Amazon stock
With the three steps before, you are now all set. So, it is finally time to buy shares of Amazon Inc. Amazon is listed on the Nasdaq as its home stock exchange. However, ADRs of the stock can be traded on other stock exchanges, like, for example, in Europe on XETRA.
The stock symbol of Amazon is AMZN. Use a market order to buy for the next possible price to get your order execution immediately, or use a limit order if you want to buy your shares for a specific price.
Step 5: Monitor your Amazon position and investment portfolio
Once you buy Amazon shares, make sure to monitor your portfolio continuously. If you are a long-term investor, frequently check if the company earnings results align with your expectations regarding the company’s growth. If you are a swing trader, ensure proper stop-loss orders are in place and monitor your long position continuously. Finally, if you day trade AMZN stock, monitor your position closely to determine when to exit and reenter the position.
Fees for Investing in Amazon Stock
There are various fees and commissions involved with investing activities. Banks, online brokers, and stock exchanges need to be paid.
Investing fees include commissions paid to the online broker. Commissions are paid for the service a broker offers to the client. The broker connects buyers and sellers and routes orders to the stock exchange, where orders get matched and executed.
Many U.S. brokerage accounts have zero-commission offers. While Robinhood began with this type of commission initiative, most other online brokers offer the same these days. That’s possible because they sell the order flow to third parties. Those third parties make money by mapping buy and sell orders in their own system, which allows them to make money with minimal price discrepancies.
The third party pays for the order flow in exchange, and the broker’s client can trade commission free. It is a win-win, at least when you invest in Amazon shares. If you day trade Amazon shares, consider a direct market access broker who routes the orders directly to the stock exchange because the order execution on high volume orders can be beneficial.
Commission Types for Trading Amazon Shares
- Zero Commission: No commission is paid by the trader to the broker
- Commission per Traded Share: The trader pays a fee, typically a fraction of a cent, to the broker for each share traded. E.g., 1,000 shares * 0.002 commission per share = $2 commission for the trade. Some online brokers also combine this commission model with a minimum commission per trade.
- Commission per Trade: Some brokers still require traders to pay a fixed commission per trade, independently from the number of shares traded. This commission type suits high-volume traders but could be better for investors who trade small share sizes.
Besides commissions, there are other fees charged by a broker:
- Inactivity Fees: Some brokers charge clients an inactivity fee if they do not actively trade.
- Trading Platform Fees: Access to trading platforms with advanced functionalities might cost a recurring fee.
- Real-time Data Fees: Stock exchanges charge brokers for using their live market data. The broker then charges the fee from their clients. Still, in many cases, the broker covers those fees.
- Withdrawal and Wire Fees: A broker typically charges $25 for outgoing wires and withdrawals.
Stock research and market analysis of Amazon shares reveal the following details.
- IPO: May 15, 1997
- Current Stock Price: $130.15
- 52-Week High: $146.57
- Market Capitalization: 1352.6B
- Income: 4.3B
- Sales: 524.9B
- Dividend: $0.0
- P/E Ratio: 315.9
- Earnings per Share: 0.41
- Insider Ownership: 9.8%
- Institutional Ownership: 60.10%
- Stock Shortable: Yes
- Optionable: Yes
- Shares Float: 9.26B
- Stock Split: 2:1 in 1998, 3:1 in 1993 and 2:1 in 1999
- Suitable for day trading: Yes
Stock analysis tools help you analyze Amazon’s stock quickly and efficiently by using the latest company financials and technical analysis parameters. This helps to define the investing strategy and makes the investing journey a better experience.
- What do you know about the financial health of the company?
- What is the most recent analyst rating?
- How did the EPS develop recently?
- What is the company’s outlook?
- What were the latest SEC filings?
- What is the typical seasonality profile of Amazon?
- Is Amazon stock undervalued?
Those are some of the most common questions for investors interested in buying Amazon shares, while day traders are interested in answering different questions like:
- Is there a high relative volume in the pre-market trading of Amazon today?
- Will the stock gap up at the open?
- How volatile was the stock price in the first 15 minutes compared to the 5-day average?
Some tools suit the needs of all types of investors and traders to make their analysis and due diligence process easier and more efficient.
Top 3 Trading Tools for Investors
Amazon.com Inc (NASDAQ: AMZN) is the highest-grossing e-commerce firm in the United States…in the world…in history. As of 2020, annual revenue approached $400 billion. Amazon’s Prime delivery service and the fact that it stocks large quantities of household goods, such as paper towels and cleaning supplies, gave the company a major boost in sales during the covid-19 pandemic, roughly an additional $100 billion over 2019 revenues.
In addition to selling countless thousands of retail products, Amazon has created several signature products and services, including its own co-branded credit card, its Kindle reader, Fire tablet and TV device, the Alexa voice recognition system, and Amazon Prime Video.
The company’s Amazon Web Services (AWS) business is the most widely used cloud platform worldwide. AWS represents a rapidly growing revenue source for Amazon (currently around 12% of total revenues), with sales rising from $3 billion in 2013 to $45 billion in 2020. Another indication of the importance of AWS to the company: the current President and CEO of Amazon overall, Andy Jassy, was formerly the founder and CEO of AWS.
On the not-so-rosy side of things for Amazon, lawsuits by authors are beginning to pile up as Amazon has joined Amazon, YouTube, and Twitter in practicing increasing censorship of conservative points of view. Some books by conservative authors have been completely banned from sale on Amazon, even by third party sellers. Others can only be found by searching the book’s exact title, a search for the book by subject matter won’t show it.
Key Metrics for Amazon
Analysts consider the following to be key financial metrics for Amazon:
Sales Growth Rate: Amazon has been all about growth from the very beginning, expanding from being an online bookseller, beginning to add clothing and other items for sale just two years into its existence, presaging its current position as a seller of “everything from A to Z”. 2020 sales growth was a more than healthy 38%, up from 2019’s 21%.
Operating Profit Margin: Amazon relies more on volume than on high margins, but the growth of its AWS business, a higher margin business segment, has helped push Amazon’s overall operating profit margin, a negative number as recently as 2014 – to just over 6.5% in 2021.
Return on Equity (ROE): Like its operating margin, return on equity is a metric that began turning around and moving strongly upward for Amazon in 2015, about the time its AWS business really started to take off. Amazon’s ROE shot up from -2.0 in 2015, all the way to 24.0 in 2019, before settling back down to around 18.0 in 2020. Investors hope to continue to see healthy and, hopefully, improving numbers.
Best Tools for Research and Analysis of Amazon Stock
What do you know about the financial health of the company? What is the most recent analyst rating? How did the EPS develop recently, and what is the companies outlook? What were the latest SEC filings, and what is the typical seasonality profile of Amazon?
Those are some of the most common questions for investors interested in buying Amazon shares, while day traders are interested in answering different questions like: Is there a high relative volume in pre-market trading of Amazon today? Will the stock gap up at the open? How volatile was the stock price in the first 15 minutes compared to the 5-day average?
There are tools that suit the needs of all types of investors and traders to make their analysis and due diligence process easier and more efficient.
Like most investors, you have probably dreamed of buying shares of a company that skyrockets in price quickly, making you enough money to make your dreams come true. The chances are that Amazon was recently the best buy alert from one of the best stock picking services, or you plan to buy shares of Amazon today.
Investing in individual stocks of Amazon has paid out for investors so far. Also, many exchange-traded funds, index funds and mutual funds hold Amazon stock, and the stock price of Amazon is currently near all-time highs. Day traders like this stock because of the high trading volume and volatility and use online trading platforms to purchase Amazon shares frequently.
How to Purchase Amazon Stock Online?
Follow the 5 outlined steps
- Find the best brokerage account
- Open your brokerage account
- Fund your brokerage account
- Buy Amazon stock
- Monitor your Amazon position continuously
How to Research the Fundamentals of Amazon Stock?
The company fundamentals of Amazon stock are broadly available with all leading trading tools. As an investor, you can use the free tools. As a day trader, consider subscribing to a day trading tool with more features like real-time stock scans.
How to Evaluate Amazon’s Financial Health?
Evaluating Amazon’s stock financial health is possible by asking your financial advisor to create reports with insightful information about the company or using stock research tools that provide you with company financial insights.
Is Amazon stock a good investment?
Amazon stock investments have paid out big since the stock market listing, making buying their shares a good investment strategy. Over 60% of institutions own the company shares, proving that investment professionals also trust the company.
What Order Type Should I Use to Place the Order for AMZN Stock?
Use a market order to ensure that you get the number of shares you want and when the price of the trade execution is not your priority. If you want to buy and sell Amazon stock for a specific price, use a limit order. However, using a limit order also means that your trade will only be executed if the limit is reached.
Should I Buy Fractional Shares of Amazon Stock?
Buying fractional shares of Amazon is a great idea for smaller portfolios, where investing in a diversified portfolio is only possible when fractional shares are traded.
How to Sell Amazon Shares?
Selling Amazon shares can be done via the brokerage account where you bought the shares. Decide how many shares of Amazon in your portfolio you want to sell and place a sell market order for immediate fills at the best possible price or a sell limit order to sell the shares for a specific price.
Does Amazon Pay Dividends?
No. Amazon does not pay dividends. Last quarter they paid a dividend of $0.0 per share to shareholders.
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