Interested in getting a piece of the fast-growing e-commerce retail giant? Below are the steps for how to invest in Amazon stock with as little as $100.
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Introduction – Why Invest in Amazon?
If you've landed on this page wanting to invest in Amazon, chances are you already know the e-commerce retail giant has been a fantastic investment historically, far outperforming the market (see below) and most other stocks.
Amazon has proven its proficiency in disruption and automation since its birth in 1994. The company quickly went public only 3 years later in 1997. With its continual advancement into nearly every corner of society, including its recent acquisition of Whole Foods, its future growth potential looks promising.
While the global pandemic has delivered a major blow to most businesses, Amazon's earnings – and subsequently, its stock price – have soared throughout it, with more people understandably buying online instead of going to a brick-and-mortar store, emphasizing Amazon's resilience to otherwise catastrophic forces. Specifically, in the 2nd quarter of 2020, Amazon's sales were up a massive 42% year over year.
This accelerated shift toward e-commerce will continue to benefit Amazon in a post-pandemic world. Of course this has been their bread and butter all along; it just may be happening sooner than anyone expected, due to the “new normal” which will continue to have more people ordering products online for delivery while sitting on their couch.
Amazon has also made an effort in recent years to diversify its revenue streams. An oft-forgotten, lesser known chunk of its business is from its enterprise cloud solution called Amazon Web Services (AWS), used by companies around the world to keep their websites and digital infrastructure running smoothly. AWS is actually an industry leader in this space.
Amazon has also beefed up its advertising offering. Third-party retailers can now pay for ad space on Amazon; these are the “Sponsored” ads seen in Amazon search results and on product pages. Retailers don't have to sell on Amazon to be able to buy ad traffic. Thus, with both its cloud platform and its advertising service, Amazon makes money even when users are shopping on other websites.
Amazon even recently announced they would begin delivering prescription drugs, potentially immediately stealing market share from the likes of CVS, Walgreens, etc., at a time when the healthcare industry is ripe for disruption. Consumers eager for lower prices and more efficiency may find the perfect solution in Amazon Pharmacy.
Other ventures include food delivery through the aforementioned Whole Foods acquisition, video content through Prime Video, transportation technology, and more.
Amazon CEO and Founder Jeff Bezos announced in early February, 2021 as part of their fourth quarter earnings report that he will be stepping down as CEO in late 2021 and transitioning to an executive chair position. The CEO role will be filled by the Amazon Web Services division CEO Andy Jassy.
Interestingly, the market barely reacted to the news, probably because the business model is clearly solid and Jassy has propelled AWS into a huge cash generator for Amazon that is expected to continue growing massively after already being the world's largest cloud computing provider. Investors clearly still have complete faith in Jassy and the company as a whole. This makes sense; Jassy has already been at Amazon for 23 years and knows the company inside and out. I wouldn't expect much to change.
Effectively, this is also an additional bet on Amazon's cloud computing business, which has grown to be a significant source of the company's revenue. While it still pales in comparison to Amazon's bread and butter, e-commerce, in pure dollars ($45 billion compared to $340 billion for 2019), the profit margins for AWS are much larger.
Amazon shares fell in late October, 2021 after earnings missed forecasts, presenting a potential opportunity to buy the stock in November, 2021 while it's on sale if you believe in the long-term viability of the company. We call this “buying the dip.” This may prove especially fruitful going into the holiday season, which is huge for Amazon as consumers buy gifts. While supply chain issues negatively affected Amazon in Q3 2021, its aforementioned AWS platform kept profits afloat, and there's no doubt it's still the reigning champ in e-commerce.
In fairness, we also saw an unprecedented skyrocketing interest in e-commerce in 2020 due to the pandemic. Thus, expectations are now resetting as things begin to return to normal. Regardless, Amazon's revenue drivers are still poised for long-term growth. In terms of fundamentals, Amazon is also still trading at a lower price multiple compared to other high-flying e-commerce and cloud computing stocks.
As you can see, Amazon has far outpaced the broader market since it went public in 1997:
How To Buy Amazon Stock
Ready to buy Amazon stock? First you'll need an online brokerage account if you don't already have one. For U.S. investors, I'd suggest M1 Finance. M1 Finance is actually currently offering a 1-year free trial of their premium “M1 Plus” account for users who sign up before February 15, 2021, a $30 bonus for users who fund their account with $1,000 or more during the month of January 2021. The modern broker offers zero fees, zero commissions, dynamic rebalancing, a modern interface and mobile app, and fractional shares. I wrote a comprehensive review of M1 Finance here. Investors outside the U.S. can use eToro.
At the time of writing, a single share of Amazon costs north of $3,000. Thankfully, we can use what are called fractional shares to invest in Amazon with much less than that. Fractional shares allow you to use M1's account minimum deposit ($100) to buy roughly 1/33 of a share of Amazon stock. After the initial $100 deposit when opening a new account, you can buy new shares of stock in the future whenever your cash balance reaches at least $25.
Opening an account with a brokerage will only take about 10 minutes. From that point you can connect your bank account to deposit money into your investment account. Then just type in what's called the ticker symbol – the unique identifying abbreviation for the stock – for Amazon (AMZN) and place the order. It's that simple! You can obviously buy Amazon alongside other stocks in your portfolio, or invest entirely in Amazon.
How To Invest in Amazon Stock – Quick Steps
- Sign up for a new account with an online brokerage like M1 Finance. (Canadians can use Questrade. Investors outside North America can use eToro.)
- Connect your bank and fund your account.
- Enter the ticker symbol – AMZN – or the company name to locate the stock.
- Place the buy order. You're done! You can now call yourself an Amazon shareholder.
Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
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