One sure way to earn a steady passive income is to add a stock that is a sure money multiplier to your investment portfolio. Amazon stock most certainly qualifies as a great investment, with a past performance on the stock market that has made many people wealthy.
However, did you know there are other ways to invest in Amazon besides having a brokerage that sells stocks to you?
The Story of Amazon Shares
The story of Amazon stock goes back to 1997 when founder Jeff Bezos “went public” and offered shares in Amazon. He pitched the company to potential investors as the world’s leading online book retailer of books.
Twenty-five years later, Amazon has become a monster retailer, an international one-of-a-kind multiplier of funds that never stops generating income for its investors.
According to an article in the Investment U of the Oxford Club, the company went from $511,000 to $15.75 million in 1996.
A $1000 investment in Amazon in 1997 would be worth approximately one million today. Buying Amazon stock is still considered to be one of the top investment choices you can make because of the company’s exponential growth every year.
By 2007 it had attracted millions of new investors by launching its famous Fulfilment by Amazon program. That was followed by Books on Demand, Amazon Music, Amazon Kindle, and Amazon Prime, all of which succeeded in reaching a broader market.
Today Amazon is vested in everything from grocery shopping to file storage to video services. It’s considered one of the top four tech companies in the world, along with Facebook, Apple, and Google.
Why Invest in Amazon Stock?
Amazon stock is one of those “evergreen” investments whose past performance has always been predictive of future results. It is simply a good bet to make money because it has yet to disappoint.
Another great thing about Amazon is that it has always made it easy for people to make it part of their investment portfolio. You can invest in the company in the traditional way by buying a single stock without a brokerage or making Amazon part of your mutual funds portfolio.
Always the model of innovation, Amazon also offers two other ways to invest, including taking fractional ownership of the company and a direct stock purchase plan (DSPP).
No matter your financial situation, there is a way to start investing in Amazon. Keep reading to find out more about your investment options.
How to Invest in Amazon Stock in 2022
Here are four ways that you can make an initial investment in Amazon shares with little investment risk.
Buy Single Amazon Stock
One of the simplest ways to buy single shares of Amazon stock is through a broker. This entails opening a taxable brokerage account, allowing holders to choose their investments and earn interest.
It is best to go with a tried-and-true brokerage house such as TD Ameritrade, Fidelity, E*Trade, or Charles Shwab when seeking brokerage services.
Vanguard offers an exchange-traded fund that allows you to purchase funds for the price of one share.
You can also add single shares of stock to a 401k or an IRA as part of a diversified investment portfolio.
Invest in Mutual Funds
To offset any fluctuations in the stock market, financial advisors often recommend investing in a mutual fund.
This indirect way of investing is considered a lower risk because the Amazon stock is offered in tandem with other solid investments from other big companies.
According to Investopedia, the top mutual fund holders of Amazon, from highest to lowest, are:
The Vanguard Total Market Index Fund
The Vanguard Total Market Index Fund (VTSAX) is Amazon’s largest shareholder, with over 12.10 million shares representing 3.40% of its portfolio.
The fund offers a 14.02% return over ten years with a required minimum investment of $3000.
The Vanguard 50 Index Fund Admiral Shares (VFIAX)
The Vanguard 500 Index Fund Admiral Shares (VFIAX) is the second-largest holder with 8.8 million shares, making up 4.20% of its portfolio.
Like the Vanguard Total Market Index, the share fund offers an investment account with a 14.02% return over ten years with a required minimum investment of $3000.
The SPDR S&P 500 ETF Trust
SPDR S&P 500 ETF Trust (SPY) owns 4.40 million shares of Amazon, representing 3.8% of the fund’s total investment.
SPY has gleaned a reputation for being the online brokerage to go for if you prefer to invest money in high-tech companies. Its holdings also have interests in high-tech companies such as Apple and Microsoft.
It has a five-year annualized return of 17.25% with a minimum investment of one share, which for Amazon, hovers in the area of $2,900 per share.
Invesco (QQQ) includes 100 of the most powerful domestic and international companies listed on the Nasdaq Market, including 4.20 million Amazon shares. It is the fourth on our list of the largest Amazon shareholders.
Invesco (QQQ) shares make up 8.43% and a 5-year annualized return of 27.20%. The minimum one share price of investment is usually in the area of $2,900.
The Fidelity 500 Index Fund
The Fidelity 500 Index Fund (FXAIX) owns 4 million shares of Amazon, representing 3.90% of its funds. The return is 14.41% over a five-year term.
An index fund is a type of mutual fund with a portfolio designed to match or track the components of the market’s next fluctuation.
Participation in an indexed fund has many benefits, including low administrative expenses, a stable portfolio, and reaching a broader market.
If you have very little money to invest, the Fidelity 500 Index is a good choice because it requires no minimum investment. You simply open an online brokerage account and buy stock.
Buy Amazon Fractional Shares
Fractional ownership is defined as percentage ownership in an investment split between individual shareholders.
Fractional sharing is not like buying individual stock but more like buying a piece of property that increases in value over the years.
In the case of Amazon, you are fractionally sharing with 20 other shareholders. This is known as a split share and can be much more affordable than attempting to purchase a full Amazon share at $3000.
The minimum cost for fractional shares can vary from broker to broker. Brokerages that offer fractional share value in Amazon include Charles Shwab, Robinhood, Wealth Simple, and Fidelity.
Direct Stock Purchase Plan (DSPP)
If you don’t wish to deal with a broker, you can buy shares of Amazon stock directly from sellers such as Computer Share or Robinhood.
One important thing about a DSPP is that you have no control over when your money is invested, making it hard to buy them while the market order is “hot.”
DSPPs can be negotiated individually and work best for those looking for a long-term investment that can also pay off in quarterly dividends.
According to The Tokenist, DSPP investment works best if you just open the account, set it, and forget it. It is for investors that are more interested in playing a long game.
Should You Talk to A Financial Advisor?
Investing in the stock market can be a bit of a crapshoot if you don’t know what you are doing. If you don’t know the basics of e-commerce, then it might be well worth your time to get some professional investment advice.
However, most of the brokers mentioned in this article, such as Charles Shwab, Fidelity, and Vanguard, have their own in-house financial experts and brokers specifically to help newcomers buy stock.
Aside from the in-house advice offered by the larger brokerage firms, there is also lots of advice available online to help familiarise yourself with their trading app.
Udemy is a good place to learn everything you ever wanted to know about Amazon, including the famous Amazon FBA business and drop shipping.
It is hard to go wrong if you decide to invest your money in Amazon. Whether you buy a single unit of stock or invest in Amazon as part of a mutual fund plan, you will reap a generous investment.
Amazon has repeatedly proved that it is a prosperity-driven company that wants to enrich all. It is a retail giant with a proven track record of expansion that supports thousands of third-party retailers.
You don’t need a lot of money to get started with them if you opt to buy fractional shares or participate in a direct stock purchase plan. All you need is an online broker.