How to buy and invest in Amazon shares

Buying Amazon stock: how to invest

1. Research Amazon shares
2. Open an online share dealing account or download the IG Invest app
3. Decide how much money you want to invest
4. Place your investment

Amazon is a US share listed on the US Tech 100 so when buying from Australia, an FX fee will be required.

What to consider before buying Amazon shares

Investing in shares comes with risk and you could lose more money than you put in. It’s therefore important to develop an investment plan to help mitigate this risk before buying Amazon shares. Here’s some things to bear in mind:

Know your long— term goals

Having clear reasons as to why you’re investing can help you make important investment decisions such as the total amount you’re wanting to invest and the amount of time you’re looking to hold the share before hopefully taking profit.

Investing also comes with risk so before you begin it’s important to determine if, long— term you can afford to lose money if the markets are not in your favour.

Know when you’ll need the money

When you invest in Amazon shares, your capital will increase by the value of the shares. This is likely to provide greater returns than cash savings which will only grow by the interest rate you receive.

For greater return on your initial capital, shares are usually held for 10 or more years. So, it’s worth considering when you’ll need the money. If you’re looking to buy a house in the next two to three years, then it’s worth either pushing back this goal by a few years so you’re more likely to reach the amount needed, or considering shorter term strategies such as trading, bonds or saving accounts.

If you’re still looking to invest, its recommended you buy lower risk shares such as Amazon. Although no investment is ever risk free, Amazon is a mature company that has reported strong revenue growth since its IPO in 1997. Its stock price is therefore less volatile than newer shares so may be a good investment if you’re hoping to take profit in the short to medium term.

Consider how much risk you can take

Financial markets can be unpredictable and there’s always the risk you could lose more capital than you put in.

Developing a risk management strategy can help you minimise losses if the market turns against you.

This could include:

• Creating a diverse portfolio with both high and low risk assets
• Looking to hold Amazon shares long— term with the view of building wealth over 10 plus years
• Monitor the markets closely

How to research Amazon stock as an investment

Fundamental analysis is one of the best ways to research the price performance of Amazon stock. It analyses financial statements and explores external factors that could impact Amazon’s share price. Here are some things to consider before investing in Amazon shares:

Operating Profit

Operating profit is the company’s total earnings from its core operations over a set time period. Amazon report on this fundamental every quarter, so it’s a good way to frequently track how the company has performed compared to its profit targets.

Business model

A business model outlines how a company is looking to make profit. This includes products, services, anticipated costs and target markets. As the company matures and market demand shifts, successful companies adapt their business models to meet consumer needs, whilst maintaining competitive pricing and a sustainable cost.

Since starting out as an online bookstore in 1994, Amazon has diversified and its business model is largely focused on eCommerce, digital streaming, cloud computing and artificial intelligence (AI).

Net sales growth

Net sales are a sum of a company’s gross sales minus its allowances, discounts and returns. Amazon reports on its net sales quarterly, so its easy to compare and calculate its year— over— year growth. You also need to track the progress of individual business units, such as the rate of growth being delivered by its lower-margin commerce business or that of its higher-margin services unit.

Why buy Amazon shares

Amazon continues to move into new areas and diversify as a business and although the company operates in several very different areas they are all separate cogs of one big machine.

It leverages strengths in one part of the business to aide another, such as building a store network to compliment the growing amount of click and collect being ordered online or enticing more people to subscribe to Prime with its entertainment services, which should help boost online sales.

This is defined as a ‘flywheel effect’ where each part of the business helps propel growth in another in what appears to be an endless cycle of growth.

Whilst some investors believe that Amazon is already very successful and there’s little growth potential left, others have a more optimistic view.

The company is working to ensure AWS becomes the number one choice for AI computing by offering a range of hardware and software options which it continues to update. It’s also developed its own AI chips.

Although there’s strong competition from Microsoft, when it comes to cloud computing Amazon is the market leader. CEO Andy Jassy believes that in the next 10— 15 years, up to 85% of IT spending will be on the cloud. If he’s correct Amazon’s share price could see significant gains.

What to do after you buy Amazon shares

After investing in Amazon shares it’s important to manage your position on our platform or the IG Invest app and monitor market movements. Financial markets can be volatile so it’s important to make informed decisions by keeping an eye on recent market news and stock performance.