There’s been a lot of buzz this year around various tech companies’ plans to start trading their stock publicly, and the photo- and idea-sharing app Pinterest is one of the buzziest. The company went public on April 18.
But just because its stock is now available, does that mean you should buy Pinterest? Maybe … or maybe not. Here are five steps to decide if this company is right for you and, if it is, how to buy Pinterest stock.
1. Know the company
Maybe you’re already an avid “pinner,” someone who uses Pinterest to post photos that inspire you. But whether or not you use Pinterest, as a potential investor it’s important to understand how the company makes money, its prospects for growth and other key financial data.
You can learn a lot about a company from its S-1, the form it files before going public.
You can learn a lot about Pinterest from its recent S-1 filing, the form companies file with the Securities and Exchange Commission before going public. Pinterest’s S-1 includes information on how it markets itself to advertisers — its main source of revenue — and where it sees opportunities to grow. (Plus, you’ll see the company describes itself as “a productivity tool for planning your dreams.” Who knew?)
Another way to find out about a company is to look online for news reports that cite analysts’ commentary and ratings on the company.
Keep in mind that initial public offerings aren’t always instant successes. Take Lyft, for example. The ride-sharing app went public in March and, as of this writing, its share price has yet to reclaim its opening-day value. Facebook, too, saw its share price drop straight out of the gate when it went public in May 2012. It started gaining only after about a year.
» Learn more: How to research stocks
2. Know thyself
If you decide that Pinterest is a strong prospect for your investment dollars, it’s time to make sure the company’s shares suit your overall portfolio.
Here are some questions to consider:
- What are you invested in already? Ideally, your overall investment portfolio is diversified across a variety of industries and sectors. That increases the likelihood that even if one of your investments starts losing value, others are maintaining an even keel or growing because they face different headwinds at different times.
- How are you faring on other financial goals? If this is money you’ll need for retirement or another important goal, or if you’re not so comfortable with the risk in hitching yourself to one company, consider investing in index mutual funds and exchange-traded funds. With those investments, you’re generally buying shares of a slew of companies, and that’s a great path to a diversified and less-volatile portfolio.
- What’s your time horizon? Generally, you shouldn’t invest any money in the stock market that you’re going to need in the next five years. You don’t want to be caught needing to pull the money out during a market downturn — you want time on your side so you can leave the money sitting there until the market recovers and starts to grow again. Here’s more on how to invest in stocks.
3. Open a brokerage account
OK, you like Pinterest’s growth prospects, and investing in this stock fits well with your overall financial plan. The next step is to open a brokerage account so you can buy and sell shares.
There are many online brokers to choose from, so compare costs and features to find the best one for your situation. Some have low trading commissions, others offer an extensive research library or a trading platform with bells and whistles. To compare your options, check out our top picks for the best brokers for beginners.
Here are some of the winners, based on our analysis:
4. Buy Pinterest stock
Got your brokerage account? Now you’re ready to buy Pinterest shares:
- Decide how many shares you want. You can start small and build your portfolio over time.
- Find Pinterest on your broker’s platform. It shouldn’t be hard to remember the ticker symbol — the name each company uses to trade on an exchange — it’s PINS.
- Place your order. There are different order types for purchasing stock. A market order is one of the simplest: It tells your broker you want to buy shares as soon as possible. But with a market order, the stock price may change between the time you place the order and when it’s executed. Another way to purchase stock is with a limit order, which instructs your broker to make the trade only at a specific price or better. For more, check out our guide on how to buy stocks.
5. Pin a reminder to your board
Now that you’ve invested your money, you can sit back, relax, maybe start pinning some photos to your Pinterest board.
But don’t ignore your investment entirely. Keep an eye on company news and check back in with your own investment goals to make sure Pinterest continues to deserve a place in your portfolio.