How to buy and invest in Microsoft shares

Buying Microsoft stock: how to invest

1. Research Microsoft shares
2. Download the IG Invest app or open an online share dealing account
3. Decide how much capital you want to invest
4. Place your investment
5. Monitor your position

How much will it cost to buy Microsoft stock? 

What to consider before buying Microsoft shares

Investing in stocks comes with a level of risk and in some cases, you can lose more than initial investment. It’s therefore important to develop a clear investment plan before you start investing, to help mitigate any risks. Here’s a few things to consider:

Understand your financial goals

Identifying both your short-term and long-term goals can help guide the total amount you want to invest in Microsoft shares, and the length of time you’re looking to hold them before selling and hopefully taking profit.

Know when you’ll need the money

Buying Microsoft stock outright is likely to generate higher returns than leaving it in a savings account where growth is often capped by low interest rates.

To get the most out of this investment, it’s recommended that you hold the stock for at least a decade to give it enough time to recover from any short-term market dips. If you need the money before then, it’s worth considering safer options such as government-backed bonds and high interest savings accounts. If you are still looking to invest, it’s recommended you opt for lower risk investments.

Microsoft is considered a medium-risk investment. As with all tech stocks, its share price can be volatile, but because Microsoft is a mature stock, its price movements are much less unpredictable than most newer stocks.

Its product offering is also well established, and the company has built up a strong customer base who continues to buy Microsoft products. Two of its main offerings, Office 365 and Azure cloud services are subscription-based, and provide a consistent stream of revenue. This helps protect the stock company from market volatility, making it a lower risk investment.

How much risk can you take?  

Financial markets can be volatile, and there’s always the possibility that you could lose your initial investment. To help prevent this, it’s important to develop a risk management strategy before investing in Microsoft shares.

Here are some ways you could mitigate this risk:

• Hold Microsoft stock at least 10 years to benefit from its long-term growth potential 
• Spread your investments across different asset classes and industries 
• Stay up to date with geopolitical events and market trends that could impact performance

How to research Microsoft stock as an investment

Fundamental analysis is one of the best ways to assess the performance of Microsoft shares. It looks into financial reports and other external factors that may affect the stock’s performance.

You can analyse the health of the economy and its sectors, study news reports, consider the competition, explore supply and demand, and evaluate the cost of production. By gathering this information, you can identify Microsoft’s inherent value.

Earnings per share  

Earnings per share (EPS) determines the value attached to each share and whether the business is profitable or not. It’s calculated by dividing Microsoft’s profit by the number of outstanding shares

P/E ratio

P/E ratio outlines how much you must spend on shares to make $1 in profit. P/E ratio is calculated by dividing Microsoft’s current market value per share by its EPS

Once you’ve established the Microsoft’s P/E ratio, it’s recommended you compare it to other tech companies, like Apple and Alphabet. A low P/E ratio in comparison to competitors may suggest that Microsoft shares are overvalued, while a high P/E ratio could indicate it’s overvalued.

Business model

A business model refers to the different ways a company brings in a profit. Originally, Microsoft relied on licensing its software and the Windows operating system to make money, but its business model has evolved over the years. It all changed in 2014 when Microsoft started shifting its focus to product integration.

The Microsoft business model can be broken into four segments:

• Productivity and business processes: information, communication and productivity
• Intelligent cloud: server products and cloud services
• Personal computing: user and developer interests
• Corporate and other: alternative products and services

Why buy Microsoft shares?

Alongside Apple, Microsoft is considered one of the most successful tech companies in the world. Since its launch in 1975 the company has been at the forefront of technological advancements, and it continues to evolve, staying ahead of industry trends.

Over the next few years, AI is expected to continue to grow, and Microsoft’s early investment in this technology, particularly through its partnership with OpenAI, has positioned it as a market leader within the sector.

Microsoft is also a market leader in cloud computing. Its cloud platform Azure is seen as one of the best, second only to Amazon Web Services (AWS), and it continues to see increased growth as more and more businesses adopt a cloud-based environment.

Its cloud-based subscription service, Office 365, is also becoming increasingly popular and offers a consistent form of revenue for the company.

Investing in Microsoft shares provides a good balance of growth, innovation, and stability. Its quarterly dividend also helps make this stock an attractive option.

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What to do after you buy Microsoft shares

After buying Microsoft shares, it’s essential to keep an eye on its performance using our app or online platform. Staying informed about market movements allows you to identify potential opportunities and risks and act accordingly.