Microsoft is one of the highest profile stocks on the market. Although not necessarily the
highest performing tech stock out there, as it has fallen behind the FAANGs in that contest, there are few companies that can boast the pedigree that Microsoft has on the market. Here’s what you should assess as you consider buying it. Consider working with a financial advisor as you gauge the value of adding tech stocks to your portfolio.
How to Buy Microsoft Stock
Microsoft trades on the NASDAQ under the symbol MSFT. This is a publicly traded, publicly listed stock, which means that you can buy it without any unusual or noteworthy restrictions. For example, you do not need to be an accredited investor nor do you need to seek a private market to trade these shares. As a result, you can buy Microsoft stock through any publicly available brokerage. This generally will entail one of two approaches:
- You can open an account through a brokerage such as Charles Schwab or Fidelity, or
through your bank if they offer an investing arm. There you can give trading instructions to a broker who will make the trades for you. In this case, you would ask them to purchase Microsoft shares on your behalf.
- You can open an account through an online brokerage such as E*TRADE. Almost all
major brokerages operate an online trading platform, so if you want to do business with a brokerage that also offers in-person trading that should be no problem. Once you have opened an account and funded it with the money you will use to make trades, you would go to Microsoft’s stock page and enter the purchase order yourself.
Microsoft Stock and Your Portfolio
The key question is whether you should buy Microsoft stock. How will this fit in your budget and overall portfolio? There are many elements to consider here, but three of the most important are described below.
Capital gains – While, again, not one of the most expensive stocks on the market Microsoft is a fairly expensive asset. At time of writing it traded for just over $289 per share. This means that buying any significant quantity of Microsoft, which is a large-cap stock, will be relatively expensive for the average retail investor. Large-cap stocks sometimes appeal to investors because of their perceived stability and tendency to rise with the overall market.
Income investing – Microsoft has a history of paying dividends to shareholders, which might make this an attractive stock for income investors. At its last payment, this stock issued a dividend payment of $0.56 per share. Again, as with capital gains, consider the relationship between value and opportunity here. Microsoft is perceived as a security you can count on for continued dividend payments.
Consider the overall position – Investing in any individual stock should always be considered a speculative move, even a stock with more stability. So before you invest, make sure that you’re doing so with the segment of your portfolio that can accommodate more risk. Then take a look at a few key data points. More casual investors can look at the stock’s price history and dividend payments over time. Make sure to compare that against the market at large and other comparable firms in Microsoft’s industry (here, technology and software). If Microsoft is going through a period where its stock underperforms the NASDAQ as a whole, then you may be better off investing in an index fund … or you may have an opportunity to grab some shares while they are selling at a discount. By contrast, if one of Microsoft’s competitors is generally posting stronger returns, you might have to choose between the two stocks.
The Bottom Line
Microsoft stock is a high-value tech stock that shows growth and stability over time. Before diving in, though, size up the tech sector in general. Then do your analysis of Microsoft earnings by looking at its quarterly 10Q form and its annual 10K. Do the same for its rivals to determine if there more attractive options in the same sector. Finally, make sure you have an exit strategy: How high would shares have to go for you to initiate a sell order?
Tips on Investing
- Should you buy stocks? That’s an excellent question. Without riskier sections of your
portfolio, you might never achieve the kind of growth it takes to meet your goals.
Without more stable sections of your portfolio, you might be too exposed to potential
downturns. SmartAsset’s matching tool can help you find a financial advisor in your area to help figure out the right balance. If you’re ready, get started now.
- Use this asset allocation tool as you weigh your risk tolerance against various combinations of large-cap, mid-cap and small-cap shares.
- Buying any stock is riskier than investing in funds or asset classes overall, but they can still be a great part of your portfolio. Here’s our step-by-step guide on how to add
individual stocks from the open market.
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