Decided Apple deserves a spot in your portfolio? Here are three steps for how to buy Apple stock, including figuring out how much you should invest.
Many investors want to take a bite out of Apple: It’s the first publicly traded U.S. company to be worth $1 trillion in value, and nearly two-thirds of Americans own at least one of its products.
The appeal of buying stock in a company you’re familiar with is understandable, and Apple is certainly a household name. But whether Apple or any other stock deserves space in your portfolio will depend on your financial situation, current holdings and investment goals.
Here are three steps to take to buy Apple stock:
1. Decide how much to invest in Apple stock
You’ve already made it past what can be an overwhelming process of investing — identifying the stock you want to buy — but you’re not off the hook for another important step: research.
Knowing a company as a customer doesn’t equal knowing it as an investor. Spend time doing both quantitative research (looking at things like revenue, net income and earnings) and qualitative research (competition, management and how the company makes money, for example).
With research-backed reasons supporting your decision to buy Apple stock, it may be tempting to assume the amount you should buy is the amount you could buy.
Say you have $1,000 to invest. Based on Apple’s trading price in the past year, that’s enough to buy five or six shares. You can find this type of real-time trading information, along with other common stock data terms (like market capitalization, earnings per share or the price-to-earnings ratio) via online brokers or a variety of financial websites by searching for Apple’s trading ticker: AAPL.
But buying as much Apple as you can afford may not be the best decision, depending on your financial situation and what else currently is in your portfolio. Consider these three tips:
- Don’t invest money you’ll need in the next five years. Make sure you’re building a rainy-day fund with enough money to cover three to six months of living expenses and saving for shorter-term goals like buying a house. While the stock market is a proven long-term investment, there are safer alternatives for short-term savings.
- Consider index funds in addition to individual stocks like Apple. Index funds provide much-needed diversification and reduce overall investment risk. This needn’t be daunting; simple portfolio strategies consisting of a handful of funds will achieve this goal.
- Add to investments in the future. Dollar-cost averaging, a strategy of making regular investments over time, ensures you don’t pour all your money into the market when prices are high.
2. Open a brokerage account
To buy Apple or any other stock, you need an account for investing — and online brokers offer the easiest way to get up and running quickly. You can open a brokerage account in about 15 minutes, and the process is similar to signing up for a checking or savings account.
Finding a broker that sells Apple stock will be easy, but it’s worth considering the breadth of additional investments the broker offers — mutual funds, exchange-traded funds, options and futures, for example — so you can round out your portfolio.
“Consider the breadth of additional investments the broker offers”
Also look for low or no commissions, excellent customer service and tools and resources to help with your investing journey.
3. Place your Apple stock order
Now all that’s standing between you and stock ownership is buying the stock. Any stock price is determined by what’s known as the bid-ask spread, the difference in price between what sellers are willing to accept and buyers are willing to pay. Apple’s bid-ask spread is always changing, but you shouldn’t necessarily obsess over getting the lowest price when buying.
“Buying Apple isn’t inherently different than purchasing other stocks”
Once you’re ready to place your order, you’ll have to choose among a variety of order types offered by your broker. But two basic ones will get the job done: market and limit orders. The difference comes down to when your trade is executed. It’s done ASAP with a market order and only when the stock is trading at a specific price with a limit order.
- A market order is best for buy-and hold investors. You may not get the exact price you see when placing your order since these are executed at the best available market price at the time. But these types of small differences won’t matter in the long run.
- A limit order is best for investors who want control over the price at which a trade is executed. This may be useful if the market is moving wildly, a stock has a wider bid-ask spread or if the price you pay is more important than executing your order. This is a risk of a limit order — it may not get executed in full or at all.
Naturally, buying Apple isn’t inherently different than purchasing other stocks (although the price may be higher), so see our general guide on how to buy stocks for additional details on making stock purchases.
After reviewing (and placing) your order, that’s it: Congratulations, you’re now an Apple shareholder. Keep an eye on the stock over time to ensure it maintains a proper place in your portfolio.
Author : Anna-Louise Jackson (nerdwallet.com)