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Due in part to its emergency use authorization from the FDA for its COVID-19 vaccine, biotech company Moderna’s stock price has grown considerably, often trading upwards of $400 per share.
But buying Moderna stock (as with any individual stock) should be approached with caution. If you’re curious about buying Moderna stock, here’s how to do it.
» Need the basics? Consult our full guide on how to buy stocks
1. The fundamentals of Moderna
Just because you’ve seen a company in headlines doesn’t make it a slam-dunk stock pick. Taking the time to research a stock can help you make informed decisions about what you add to your portfolio. By looking at revenue, net income and earnings, along with other important factors such as management and any competitive advantages, you can develop a well-rounded perspective on a company.
You can get this information through your online broker, on Moderna's investor relations website or on financial information sites. If you’re not sure where to start, learn more in our article on how to do stock research.
2. Whether Moderna fits into your portfolio
Once you've dug into the fine details to decide if Moderna stock is a good investment, you should also consider whether the company is right for you personally. Any stock you buy should align with your investment goals and risk tolerance.
To start, consider your existing asset allocation. A good portfolio is a diversified portfolio, and that means it isn't tilted toward any one stock, industry or geographic region. Rather, a common suggestion is to spread your investment dollars around, so if one company hits rough waters, your entire portfolio doesn't sink.
For many investors, the easiest way to do that is through low-cost mutual or index funds, which offer you exposure to a range of different stocks within a single fund. A biotech index fund or exchange-traded fund, for example, might hold shares of Moderna along with many other companies. That single fund still wouldn't make for a diversified portfolio — remember, spreading your money across various industries is part of the goal here — but combining it with a few other broadly diversified funds could.
Before you decide to make any investment, be sure that it won't skew your diversification in any way. That means considering the companies you're currently invested in, as well as the types of stocks you hold, balancing emerging growth stocks with mature, reliable companies. That way, when the next market downturn hits, your portfolio will be equipped to handle it.
» Need a brokerage account? View our picks for the best brokers for stock trading
3. How much you should invest in Moderna stock
If your financial situation and investment goals align with adding Moderna to your portfolio, you’ll have to figure out exactly how much money to invest. Some high-profile stocks (such as Amazon) trade for thousands of dollars a share. Moderna is slightly more modest, at several hundred dollars per share.
That is significantly higher than Moderna has traded in the past. Before the company's vaccine news, a trade price under $20 was typical. Buying a stock while it's hot doesn't guarantee continued returns. In fact, it can often result in losses.
As you decide how much to invest in Moderna stock, consider these general rules of thumb:
Stocks are typically considered a long-term investment. If you think you’ll need the money you plan to invest in Moderna within the next five years, you may want to reconsider. Stocks are volatile. The time frame for your investment should be long enough to allow you to ride out that volatility, so you don't have to sell while the stock is down. Here are some other ways to save for short-term goals.
Don’t dedicate more than 10% of your portfolio to individual stocks. Investing in individual stocks is much safer when done in moderation. By investing the majority of your portfolio in mutual funds such as index funds, you lower your risk and increase diversification.
If you’re excited about Moderna but don’t want to purchase a full share, services such as Robinhood or Stash offer fractional shares, which allow you to invest a smaller amount and purchase only a portion of the stock.
A member of the author's household owns shares of Moderna stock.