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Amazon's success is rooted in making it easy for customers to quickly — and perhaps impulsively — buy products online. The company is one of a handful with over a $1 trillion valuation, and it initiated a 20-for-1 stock split on June 3.
What that means: Current Amazon investors received 20 shares for every one share they owned, though the total value of their shares remains the same. New investors can now buy shares of the stock for significantly less — leading up to the stock split, Amazon stock was trading in the upper $2,000 range.
There's no "buy now" button for stocks, but investing in Amazon is nearly as easy as shopping on Amazon.com. Here's what to consider before investing, and how to buy Amazon stock.
1. Do your research into Amazon
There’s an understandable appeal to owning shares of a company you interact with regularly, but what you know about a company as a customer often doesn’t equal knowing it as an investor.
Don’t base your to-buy-or-not-to-buy decision on a stock's past performance or current price. Instead, rely on the all-important step of scrutinizing Amazon’s merits as an investment. That includes digging into the company's management, revenue, net income and earnings, as well as analyzing the competition. (Learn how to do stock research.)
Aside from those factors, you'll want to consider whether buying Amazon stock is the right decision for your portfolio. The answer depends on your financial situation, current holdings and investment goals.
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2. Decide whether you should buy Amazon stock
You can find Amazon's current stock price by searching for the company's trading ticker, AMZN, on a financial information website or through your online broker.
Before you commit, consider:
How you'll achieve diversification. Individual stocks are typically considered risky because they lack diversification; if the company hits a rough patch, your portfolio will, too. To soften that blow, investors often turn to low-cost mutual funds like index funds to make up the bulk of their investment portfolios. These funds track a market index and invest in many companies — in some cases, that includes Amazon — which makes it easier to diversify your portfolio and lower your investment risk.
Your future investment plans. In general, it's wise to invest on a regular basis. There’s even a name for this strategy: dollar-cost averaging. It means investing set amounts at standard intervals, rather than putting a lot of money into the market, or into a stock like Amazon, at once. Dollar-cost averaging can help ensure you don’t always buy stocks or other investments at a high price.
3. Consider how much to invest in Amazon
One of the most important considerations is how much money you can afford to put into Amazon stock.
The answer isn't necessarily the same as how much money you have available. That's because the stock market is considered a long-term investment, and financial experts typically warn against buying any stock with money you’ll need within the next five years.
Before buying individual stocks, it's also wise to make sure you have an adequate emergency fund and that you're saving for any important short-term goals. (Here are some suggestions for where to save for short-term goals.)
If you're new to the stock market or have a small amount of money to invest, you might also be interested in fractional shares, which allow you to purchase a piece of a share — based on a set amount of money you want to invest — rather than the whole thing. Not all online brokers offer fractional shares, but the offering is becoming more common.
4. Open a brokerage account
Buying Amazon stock requires you to have a brokerage account, and online brokers offer the quickest and easiest ways to start one today. If you don’t have a brokerage account, you can open one in about 15 minutes — the process is similar to signing up for a checking or savings account. See our tutorial on how to open a brokerage account for more details.
If you can afford a single share or more of Amazon, you have a wide range of options. Look for a broker with low or no commissions, excellent customer service and useful tools and resources.
If your heart is set on Amazon and you can’t afford to buy a full share at the current trading price, look at brokers that offer those fractional shares mentioned above. That will allow you to buy a portion of one share of Amazon to get started.
5. Buy Amazon stock
Once you have a brokerage account and you've decided how much to invest, it’s time to buy Amazon stock.
A stock’s price is determined by its bid-ask spread — essentially, the gap between the price buyers are willing pay and the price sellers are willing to accept. The bid-ask spread changes throughout each trading day, but you shouldn’t get too hung up on getting the lowest price to the penny — more on that below.
When you’re ready to buy the stock, you’ll do so through your online broker's website or trading platform. You'll be asked to choose an order type, which determines when and how your order to buy Amazon stock is executed.
Most brokers offer a range of order types , but you'll generally be fine if you stick to two choices: a market order and a limit order.
A market order executes ASAP. It is generally a good choice for buy-and-hold investors. The price you pay for the stock may vary slightly from the price you see when placing your order, because a market order prioritizes time: It is executed as quickly as possible at the best available price.
A limit order is a good choice for investors who prioritize price over speed: Your order will be placed only if the stock price hits the level you've set. Limit orders are helpful during wild market swings, but the risk is that your order may not get executed in full or at all.
Whether you're buying Amazon stock or shares in another company, the process is generally the same. Consult our full guide on how to buy stocks to learn more.
» View our list: The best-performing stocks
Neither the author nor editor held positions in the aforementioned investments at the time of publication.