If you’ve ever binge-watched “Stranger Things” or “Orange Is the New Black,” you know how powerful Netflix’s programming can be. But does the company’s stock have the power to multiply your money?
No doubt people who invested in Netflix years ago aren’t sorry they did. The company started trading publicly at about $1.20 a share in 2002. The stock price topped $400 in June 2018.
Still, Netflix’s share price has tumbled along with most other stocks in the recent market turbulence — down to about $260 recently. (Maybe if it just brought back Marvel’s “Luke Cage” all of our problems would be solved? This viewer says yes.)
Market ups and downs are a fact of life, and it’s important to fight your fear and keep investing when stocks go south. But here’s another fact: If you’re going to invest in individual companies, rather than broadly diversified mutual funds, then you need to do some research to make sure you know what you’re getting into. (Here’s how to tell if you should invest in individual stocks or mutual funds.)
Put another way, does the fact that you spend your weekends with Netflix mean you should invest your money with Netflix? Take the following steps to find out:
1. Do a little Netflix research
In a sector as fast-moving as the online entertainment industry — hello, YouTube TV! — it’s hard to know what new technology or product is just around the corner or which company might start producing popular original content, just like Netflix did.
Do your research to make sure you understand the competitive risks the company faces.
That means doing your research to make sure you understand the risks — from competing technologies, programming and more — so you can prepare yourself for potential bumps in the road. Read Netflix’s recent earnings reports. Find out what analysts have to say about the company and the industry. For more tips, see our guide on how to research stocks.
Researching a company can help you see the risks — and it can highlight the potential rewards. If, after doing your research, you decide Netflix is a stock you want to keep playing, then read on.
2. Consider Netflix in the context of your investment plan
Even if a company’s financials are stellar and its share price has nowhere to go but up, that doesn’t necessarily mean the stock is a good fit for you.
For example, maybe you’ve already got a big chunk of your investment money in high-growth (and potentially high-risk) technology stocks. You might not want to add more money in this sector.
Or, maybe the money you can afford to lose is already tied up elsewhere. You don’t want to put Junior’s entire college fund into one technology stock.
If you’re going to need this money in five years or less, it probably shouldn’t go into the stock market.
Another consideration is your time frame. Are you going to need this money in five years or less? If so, it probably shouldn’t go into the stock market because you don’t have enough time to sit out a market crash.
The best way to make a smart investment decision is to have a clear sense of your financial goals for this money, and a sense of how diversified (or not) your overall investments are.
If you know that you’ve got at least five years to let this money ride and that investing in Netflix fits your overall financial plan, then read on.
3. Open a brokerage account
If you have a brokerage account, then skip ahead to No. 4. If you don’t have an account, it’s easy to open one. You want to find a low-cost broker that offers the types of investments you’re interested in. Here’s our guide to opening a brokerage account.
And if you want help finding the best broker for your situation, see our best brokers for stock trading.
OK, once your account is open, now’s the time to buy.
4. Get out the popcorn — you’re ready to buy
You’re almost done! The final two questions: How many shares do you want to buy? What type of order do you want to use?
- For the “how many shares?” question: You can buy individual shares of Netflix at any online broker. But if the sticker price is too high for you, keep in mind that some specialty brokers will let you dip your toes by buying a fraction of a share — one example is investment app Stash.
- For the “what type of order?” question: Two of the most common types are “market” orders and “limit” orders. With a market order, you’re telling the brokerage to buy the stock as soon as possible. The final price might be slightly higher or lower than the price you see when you place the order. A limit order tells your broker that you only want to buy the stock at a specific price, with the caveat that, if the stock isn’t available at that price, your order won’t go through.
Got more questions? Check out our guide on how to buy stocks.
5. Stay through the credits
Once you’ve invested your money, you’re pretty much done. Of course, you want to keep watching your investments. At some point, you might find it’s time to sell. Fingers crossed, you have an ending that’s more “Love Actually,” less “Black Mirror.”