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Since Bill Gates and Paul Allen founded Microsoft in 1975, it’s become one of the world’s largest technology companies, producing everything from computers and software to gaming systems and cloud computing support for space exploration.
All that growth means robust revenues. In its most recent quarterly report, Microsoft’s revenue was $51.9 billion, a 12% increase over the same quarter last year. If you’d like to add some of those impressive financials to your portfolio, here’s what you need to know to buy Microsoft stock.
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How to Buy Microsoft Stock (MSFT)
1. Pick a Brokerage
To buy MSFT, you’ll need an account with an online brokerage or investment app. Fees and account minimums vary based on the platform you use, so be sure to research these before you sign up. Check out our picks for the best online brokers and best investment apps to assist your research.
2. Set Investment Goals
Once you’ve selected a brokerage or investment app, think about the goals for your investment. Deciding on your goals will determine which type of account you need:
- Retirement. If you want to invest for your golden years, an individual retirement account (IRA) is probably your best choice because of its powerful tax advantages. You’ll need to decide between a traditional IRA and Roth IRA, each of which offers unique benefits, depending on your financial situation.
- Building wealth. If you’re looking to simply build your wealth, go with a normal taxable investment account. You won’t get a tax break, but you also won’t be limited in when, or under what circ*mstances, you can withdraw your money.
3. Decide How Much You Want to Invest
Unless you have a net worth like Bill Gates, you probably aren’t ready to buy a huge stake in Microsoft, despite the company’s solid performance of late. When determining how to much to put into any one stock, ask yourself the following questions:
- What’s your budget? You don’t want to put any money into stocks that you’ll need to cover your immediate expenses. But once you’ve squared those away and set aside some for an emergency fund and retirement savings, you’re free to invest any that’s left over.
- What is Microsoft’s current price? Microsoft isn’t cheap; in December 2021, its stock price topped $300, and it’s been over $250 per share since June 2021. While some brokerages allow you to buy fractional shares, others require you to buy shares in their entirety, meaning it would cost you hundreds just to get a single share.
- How comfortable are you with investing and risk? When you invest in any single stock, even well-known companies like Microsoft, you take on more risk than if you invest with a diversified fund. You’ll experience every high (and low) that MSFT goes through, and you could lose a substantial amount of money quickly. If that makes you nervous, you may be better off with index funds and exchange-traded funds (ETFs).
- How does Microsoft fit into your existing investment strategy? “Microsoft can act as a core or foundational holding across many different portfolios,” says Matt Weber, a chartered financial analyst (CFA) with UMB Bank. “The stock is unique as it has attributes that are attractive to growth, value and income-oriented investors.” You’ll want to figure out in which ways Microsoft might work in your portfolio and complement your existing investments.
- How often do you plan to buy MSFT? Rather than investing thousands at once, you might use dollar cost averaging to buy smaller amounts of Microsoft at regular intervals, spreading out the expense, reducing the likelihood you go in when the price is high and potentially lowering the average cost you pay per share.
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4. Do Your Homework on Microsoft
Before investing money in any company, it pays to do your research. The U.S. Securities and Exchange Commission (SEC) requires publicly traded companies like Microsoft to file information about their finances and performance on a quarterly and annual basis. You can find the Form 10-Q (quarterly reports) or Form 10-K (annual reports) on the company investor relations site.
You can also use tools like Morningstar or Forbes to get insights and market analyses from industry experts.
5. Determine Your Order Type and Place Your Order
Once you’re ready to place your order, log into your trading or investment platform and enter Microsoft’s ticker symbol (MSFT) as well as the number of shares or dollar amount you want to buy. You can opt to buy Microsoft stock at its current price—known as a market order—or you can place a stop order to buy once it reaches a certain price.
Microsoft is traded on the Nasdaq, the world’s second-largest stock exchange. The Nasdaq’s normal trading hours are 9:30 a.m. through 4:00 p.m. ET Monday through Friday, though your brokerage may provide you access to pre- and after-market extended trading hours.
6. Evaluate Microsoft’s Performance
No matter what you invest in, it’s always wise to periodically review your investment’s performance and see how it measures up. You’ll want to start by determining MSFT’s returns for a given period so you can compare it to those of specific market benchmarks, such as the or the Nasdaq 100 index.
This will give you an idea of how your investment’s performance stacks up to the performance of particular industries or the overall stock market. You may also track its financials over each quarter or year to decide if it’s using its financial resources wisely.
How to Sell Microsoft Shares
If you want to sell your Microsoft stock, log onto your brokerage’s trading platform or investment app and type in the ticker symbol and the number of shares or dollar amount you want to sell.
Before selling any shares, though, make sure you consider capital gains taxes. If stock prices have gone up since you invested your money, you’ll be taxed on your profits, unless you’re investing in a tax-advantaged account. If you want to minimize the amount you may owe, consult with a tax professional.
Other Ways to Invest in Microsoft
If you’d like to invest in MSFT but want to minimize your risk, you may look to index funds or ETFs that hold it. It’s not hard to find funds that do: Based on its market capitalization, Microsoft generally makes up 6% of S&P 500 funds and 10% of Nasdaq 100 funds.
These funds present an excellent opportunity for most people to get exposure to the historic growth of Microsoft.
“From a portfolio management aspect, your portfolio needs to be large enough to buy individual stocks while maintaining adequate diversification,” says Weber. If you don’t have the money (or time) to manage a sufficiently diversified portfolio on your own, ETFs and index funds offer a great alternative.
