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Even if theme parks aren’t your thing, there’s a good chance some of your money flows into The Walt Disney Company’s pockets: The behemoth owns ESPN, ABC and Marvel Studios, among other entertainment brands.
Given the company's broad reach and cult following, it’s no surprise that Disney stock is a frequent object of investor attention.
If the idea of buying Disney stock makes your Mickey Mouse ears perk up, here’s what to consider first.
1. The fundamentals of Disney stock
You may be well-versed in all the Disney characters, theme parks and brands, but you’re probably less familiar with the bones of the company: its management, revenue, net income and earnings. With a company like Disney, you also want to be familiar with where revenue is coming from, or which divisions drive the biggest profits. This is the difference between knowing a company as a customer and knowing it like an investor.
It's helpful to look at the industry in which Disney operates, as well as the company’s competition. What challenges are ahead for the entertainment industry, and how is Disney positioned to weather — or not weather — them? Has Disney reacted well to current industry trends, such as consumers ditching cable TV for streaming services?
If you’re struggling to figure out how to answer these and other questions, our guide to how to research a stock will help. Disney's investor relations website collects the company's annual and quarterly reports. And online brokers offer research on their platforms, as do independent analysis sites.
» Access stock research: Read our review of Morningstar
2. How Disney stock fits into your portfolio
You’ve looked at Disney from every angle. It’s a blue-chip stock with a solid history. But there are still risks in buying its shares.
Individual stocks are always riskier investments than diversified options like index mutual funds or exchange-traded funds. To build a diversified portfolio out of individual stocks, you’ll need to research 20, 30, maybe 40 companies. That takes a lot of work.
Index funds and ETFs do that work for you, by tracking a market index and allowing you to hold stock in hundreds of different companies within one fund. Unlike with an individual stock, when one company in an index fund goes belly up, you don’t lose your full investment. Over the long term, the other companies in the fund pick up the slack.
This aligns with two principles of investing — diversification and asset allocation — that encourage spreading your money across various companies, industries and asset types (e.g., stocks and safer investments like bonds) in order to reduce risk. You'll also want to be mindful of your goals and why you're investing in the first place.
None of the above is meant to scare you off buying Disney stock. In fact, owning shares of a publicly traded company is a great way for adults and kids alike to get a hands-on education about how businesses are run and how the stock market works. You just want to consider your whole portfolio and how buying Disney would fit in it.
» View our list: The best-performing stocks
3. How much you can afford to invest
After you've done the research and analyzed your portfolio, if you want to buy Disney stock the next question is: How many shares? You can find Disney on the ticker (DIS) and divide the amount of money you have by its current share price. But buying as much Disney as you can afford may not be the best decision.
First, consider the following about your financial situation:
How will buying Disney affect the balance of your portfolio? Investors often aim to have a diverse set of investments, ranging across companies, sectors and assets. When it comes to stocks, one general rule is to not have more than 10% of your portfolio in a single stock.
What are your short-term goals? The stock market fluctuates from day to day and usually is best for long-term investing. It is not the place to stash your short-term savings, where the goal is not growth but instead to preserve what you have. You should also think about whether you have enough set aside for an emergency. Three to six months of living expenses is a common suggestion from financial experts.
How will you invest going forward? Rather than putting in all your money at once, the strategy of dollar-cost averaging calls for making regular investments over time. This can help you avoid buying only when prices are high.
See our general guide on how to buy stocks for more details, including a full breakdown of various order types.
» Need a broker? View our list of the best brokers for stock trading
Disclosure: The author held no positions in the aforementioned securities at the time of publication.
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