How To Invest In Amazon
Explosive e-commerce growth over the past two decades has investors around the world asking “how to invest in Amazon.”
The Seattle based company is considered one of the Big Four in the tech space, along with Google (Nasdaq: GOOGL) , Apple (Nasdaq: AAPL) and Facebook (Nasdaq: FB). In addition to e-commerce, Amazon (Nasdaq: AMZN) has large footprints in the digital streaming, artificial intelligence and cloud computing space. Amazon is also investing in self-driving car technology, which is no surprise considering its history of innovation.
If we go all the way back to 1997, the year Amazon filed to go public, the company was not even on most investors radars. Back then they were the self-titled “leading online retailer of books.” They still sell books today, but as we talked about earlier, they do a whole lot more.
However, as early on as 1996 the impressive growth for Amazon started. The company went from $511,000 to $15.75 million in that year alone.
Today you’ll frequently hear investors lamenting “if I had only invested in Amazon in the 90s I would be set for life.” This is undeniably true as the stock has grown from its IPO price of $18 per share to the current price of $3,300.
To put that into perspective, a small $1,000 investment back then would be worth over $1.2 million today. Not a bad ROI.
Not a bad life either for 56 year old Founder Jeff Bezos, who went from working out of his garage to becoming the richest person in the world. Bezos’ net worth is currently a whopping $189.3 billion after adding another $74 billion this year alone.
So the question is, will the growth continue? How high can Amazon’s stock go? Well if the past decade is any indicator, the answer is A LOT higher.
Even in just the past five years the stock has increased over 539% with no signs of slowing down.
So let’s talk about how to invest in Amazon.
How to Invest in Amazon: Here Are Your Options
The easiest and most traditional way to acquire shares of Amazon is through a brokerage account. You can do this through a traditional 401k, IRA or a Taxable Brokerage Account.
If you aren’t currently using a broker, Vanguard, Fidelity, Charles Schwab, Robinhood and Webull are a few options with low or no cost fee structures.
Another way to gain access to shares of Amazon is through mutual funds. This popular strategy allows for easy diversification as each fund that owns Amazon, also owns many other stocks which can lower your overall risk.
These five mutual funds collectively own just under 7% of Amazon and may be a good option for those looking to indirectly buy shares of Amazon.
- The Vanguard Total Stock Market Index Fund (VTSMX)
- The Vanguard 500 Index INV (VFINX)
- The SPDR S&P 500 ETF (SPY)
- PowerShares QQQ Trust, Series 1 (QQQ)
- The American Funds Growth Fund of America (AGTHX)
How to Invest in Amazon: Fractional Shares
For many newer investors, a $3,300 share of Amazon may be out of reach. However there is no need to fear because you can buy fractional shares.
It’s true… you can invest in Amazon stock for as small fraction of a single share’s price. Brokerages that offer fractional shares include Fidelity, Robinhood and Charles Schwab… just to name a few.
Direct Stock Purchase Plan (DSPP)
If you don’t want to use a broker, you do have another option. A direct stock purchase plan (DSPP). As of August 2019, you can now buy and sell Amazon stock on platforms like Computershare.
Direct stock purchase plans are suitable for those looking to make long-term self-directed investments. Please be aware of the transaction fees if you are considering this option.
Consult a Financial Advisor
As you grow your net worth, working with a financial advisor may be a good option for you. It’s no secret that we are and have been extremely critical of financial advisors. That’s because there are a lot of bad ones out there. It’s important to do your due diligence before picking a financial advisor to manage your investments.
However, if you do end up going with a financial advisor, they will be able to help you determine whether an investment in Amazon is right for you. In fact, they may recommend investing in some of mutual funds that were mentioned earlier.
Final Thoughts of How to Invest in Amazon
Regardless of how you invest in Amazon, it’s important to consider why you are investing. If there is one thing that you can learn from Amazon’s journey, it’s that investing for the long haul pays off. Amazon’s history of steady and consistent growth over time is an obvious parallel to a long-term investing strategy. And even though Amazon has already reached historic highs, there is still plenty of potential for years to come.
If you’re looking to achieve financial freedom via a simple investment plan, we suggest signing up for our Liberty Through Wealth e-letter below. Our experts there can provide the tips and tricks to help investors navigate any market condition while looking for the next big thing.
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