As an experienced and successful Amazon seller, you likely already understand the incredible power of Amazon‘s platform. With over 300 million active customers, Amazon has become the dominant force in ecommerce.
But did you know that beyond just selling on Amazon, you also have the option to potentially profit from Amazon‘s growth by becoming an Amazon investor?
In this comprehensive guide, I‘ll provide fellow Amazon sellers with expert insights on navigating Amazon stock trading to expand your income streams.
Whether you‘re just getting started with investing or looking to add Amazon shares to your portfolio, read on for detailed guidance on making the leap from seller to trader.
Getting Started with Amazon Stock Trading
Trading stocks, including Amazon‘s, may seem complex and risky if you‘re new to investing. But with the right foundation, it can be an approachable way to expand your income. Here are the key steps I recommend as an experienced trader to get started:
Educate Yourself on Investing Basics
Before you begin trading, spend time learning core investing concepts like shares, day trading, options, ETFs, mutual funds and more. Knowing these terms will help you make informed decisions. I suggest reading educational books, taking online courses through sites like Udemy, and learning from trustworthy financial websites.
Choose an Investing Strategy
There are many ways to approach Amazon trading based on your goals and preferences:
- Self-directed trading allows you to buy/sell stocks yourself through an online brokerage account. This hands-on approach requires more time and research but gives you full control.
Employer-sponsored 401k plans often allow you to invest your retirement contributions into funds that include Amazon. This can be a nice introduction to investing.
Managed trading means hiring a broker, advisor or robo-advisor to handle investments for you. This costs more but simplifies the process if you‘re busy.
Mutual funds or ETFs let you invest in bundles of stocks like Amazon for diversification. This can be a lower cost way to get started.
Select a Reputable Online Broker
Online brokers like Fidelity, Vanguard and Charles Schwab provide slick platforms for self-directed trading and straightforward account setup. Compare fees, account minimums, trading tools and more to find the right fit.
Open a Brokerage Account
Opening an individual brokerage account takes just minutes online. This allows you to buy/sell at your discretion. Retirement accounts like 401ks also let you invest in stocks with tax advantages.
Determine Your Budget
Individual Amazon shares currently trade between $85 – $130. Determine how much you can invest while still paying bills and meeting savings goals. A budget helps avoid overextending your finances.
Take a Long-Term View
Though you can trade Amazon daily, most experts recommend long-term buy-and-hold strategies given Amazon‘s steady growth. Don‘t obsess over daily price moves and instead focus on the long-term trajectory.
Monitor Your Investments
Check your investment performance periodically to ensure your allocations still match your risk tolerance and goals. Rebalance holdings if needed. But don‘t watch too closely!
Keys to Successfully Trading Amazon Stock
Now that you‘ve got the basics down, let‘s explore tips for buying, holding and selling Amazon stock:
Understand Amazon‘s Business Model
Do thorough research on how Amazon generates revenue across retail, cloud computing, subscriptions, advertising, and other areas. Knowing their diverse business drivers will help inform your trading.
Consider Hiring a Financial Advisor
A financial advisor can provide guidance for new investors, including determining ideal allocation to Amazon based on your full financial picture and risk tolerance. Their fee is usually worth the expertise.
Practice Patience and Discipline
Trading on emotion often backfires. Have a clear trading plan and investment policy statement to promote discipline. Amazon is a long-term play – don‘t fret over day-to-day fluctuations.
Utilize Available Brokerage Tools
Online brokers provide helpful trading tools like watchlists, price alerts, risk analysis, and more. Use these to monitor Amazon and get notified of important price movements.
Learn Tax Implications
Understand if/when capital gains taxes apply for your trading strategy. For example, taxes on profitable trades only apply when you sell, not when just holding. A financial advisor can clarify based on your situation.
Consider Partial Shares
Rather than saving up for whole Amazon shares, many brokers now allow buying fractional shares. This provides greater flexibility no matter your budget.
Amazon issues a small cash dividend per share annually. Set your account to reinvest these dividends into more shares for compound growth over time.
Review Company Earnings Reports
Amazon releases quarterly earnings reports. Review these once comfortable with basic trading to gain deeper insight into their financial health and growth.
Don‘t Panic Over Volatility
Don‘t get frightened by temporary price drops. Amazon‘s growth story remains intact long term. Trade calmly and avoid panic selling when markets inevitably fluctuate.
Lean on Trading Communities
Join online trading forums and communities to learn from more seasoned Amazon investors. But be wary of bad advice! Verify any tips with trusted sources.
Key Benefits of Amazon Stock
Despite the risks that come with any investment, here are a few of the reasons I‘m long on Amazon as an investor:
- Continued market dominance – Amazon captured nearly 41% of all U.S. ecommerce spending in 2021 with no signs of slowing. Their scale leads to sustained advantages across fulfillment, logistics and more.
Leadership in the cloud – Amazon Web Services (AWS) comprises over 33% of global cloud infrastructure spending. This high margin recurring revenue diversifies Amazon‘s earnings.
Massive customer base – Amazon boasts over 200 million Prime subscribers and over 300 million total active customer accounts. Their loyalty drives repeat purchases and retention.
Culture of innovation – Amazon has a proven track record of disruptive innovations from Kindle e-readers to Alexa voice devices to cashierless Amazon Go stores. They continually improve the customer experience through cutting-edge technology.
Financial performance – Amazon has delivered a 27% average annual return over the past 5 years, far outpacing the S&P 500‘s 11% annualized returns. Their consistent growth presents a compelling reason to invest.
Key Risks to Consider
- Increased competition from retailers like Walmart and Shopify attempting to gain ecommerce market share
- Potential for declined growth post-pandemic when brick-and-mortar retail recovers
- Regulatory scrutiny around anti-competitive practices could lead to fines or business changes
- Rising inflation and supply chain costs may squeeze profit margins
The idea of directly investing in Amazon may seem intimidating as a newcomer to stock trading. But with the right education, tools and discipline, it can be an approachable way to expand your income by participating in Amazon‘s continued growth story.
Start small, lean on available resources, and take a long-term, passive approach to reduce risk and stress. If after doing thorough due diligence you remain confident in Amazon‘s future prospects, investing alongside your Amazon selling could help unlock an additional revenue stream.
As always, please feel free to reach out if you have any other questions! I‘m happy to offer guidance and insights from my decade of experience successfully trading and investing in Amazon.