You don't have to be an athlete to wear Nike products — the company is solidly a household name. That, combined with a history of strong performance, is enough to have many investors wondering how to buy Nike stock, which trades under the symbol NKE.
Ready to put your money where your feet are? Here are some things to consider before you buy shares of Nike stock.
1. Research Nike stock
Maybe you’ve been wearing Nike Air since you were a teenager, or you wear Nike workout gear to the gym on the daily. You’re familiar with the brand, but that doesn’t mean you’re familiar with the company or the kind of details you need to evaluate before buying Nike stock.
Before you buy any stock, you need to dig into the company and industry fundamentals. That means researching Nike’s management team, revenue, net income and earnings, as well as expectations and anticipated challenges for both the company and the athletic wear industry as a whole. Consider not just what could go well for Nike in the coming months and years, but also what could go wrong and how that could affect the price of the company’s stock.
Even the most in-depth research won’t predict the future of Nike — or any other company — but it will help you make an educated decision about whether the stock deserves a spot in your portfolio. (Learn how to research stocks.)
» Looking for stock research? Read our review of Morningstar
2. Consider whether Nike stock fits in your portfolio
Nike might be a household name, but that doesn't mean its shares are right for everyone's portfolio. Investors' current holdings, future goals and tolerance for risk can all impact whether a stock purchase makes sense for them.
On the topic of risk tolerance, it's important to remember that individual stocks — even from established, growth companies like Nike — are generally riskier than diversified investments like index mutual funds.
Why? Because index funds track a market index and hold stock in many — often hundreds — of companies, rather than just one. Over time, companies within an index fund that do well will balance out those that don’t, which makes you less likely to lose your investment.
That’s not to say you can’t also pick and choose individual companies to invest in, like Nike. But when you do, you may choose to limit your exposure to any single company. A popular rule is to limit individual stocks to 10% of your overall portfolio, reserving the rest for more-diversified investments such as low-cost index funds.
3. Set a budget for Nike stock
With any investment you choose, it’s OK, and even wise, to start small with one or two shares; you can always add to your investment over time. As of this writing, shares of Nike are selling for about $130 apiece. But there are other things to consider as you think through how much you should invest in a company like Nike.
One of the most critical things to consider is your time horizon. Generally speaking, it is risky to invest money in the stock market if you expect to need that money in the next five years. This is true of stock market funds as well as individual stocks such as Nike.
With a short time horizon, you’re more likely to have to sell at a loss because you won’t have time to bounce back from market fluctuations. But with longer time horizons, the market's long-term trajectory can work in your favor.
Of course, not every company's stock is destined to rise over time. Some companies will even go out of business, leaving their stock worthless. That may not be likely in the short term with a large company like Nike, but it's still important to note that individual stocks can and do lose value — sometimes dramatically. You need to be sure you can weather those storms before you invest in any company.
» Never bought a stock before? View our full guide on how to buy stock.
Disclosure: The author held no positions in the aforementioned securities at the original time of publication.