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Even though the name of this company is somewhat unknown, chances are that you have used NVIDIA products in a game console or personal computer. Today, NVIDIA dominates the graphics processing unit market, and in the future, its products could form the backbone of artificial intelligence (AI) computing applications such as self-driving cars.
This exciting potential has fueled NVIDIA’s strong performance: in 2021, its third-quarter revenue grew 50% year-over-year and its share price rose nearly 127% on the ‘year. Forward-thinking investors may want to include these cutting-edge large-cap stocks in their portfolio. Here’s how to buy NVIDIA stock in five simple steps.
How to Buy NVIDIA Stock (NVDA)
1. Open a brokerage account
The first step to buying stocks is to open a brokerage account, if you don’t already have one. (If you do, you can skip to step 2.)
You will want a brokerage account with no trading fees and low account minimums. To get a head start on what’s best for you, check out Forbes Advisor’s lists of the best investment brokers and apps.
When deciding on a brokerage, you should also consider your investment goals. Are you hoping to save for your retirement, invest for your child’s education, save for a down payment on a home or simply build wealth? You can find investment accounts with unique tax benefits tailored to each of these scenarios.
It’s important to keep your goals in mind when choosing how you invest. Many large brokerages offer all the accounts you might need, but all of them do. Be sure to choose one that offers investment accounts that best suit your goals.
Types of investment accounts
An Individual Retirement Account (IRA) is essentially a personal 401(k). It gives you tax advantages when you save for retirement, such as tax relief for you now or when you make retirement withdrawals, as well as an opportunity to avoid the tax you would otherwise have to pay when you sold profitable investments in your IRA. But here’s the catch: if you need to access money in the account before you’re at least 59½, you may have to pay taxes and a penalty.
A 529 account gives you tax advantages when saving for a child’s education, whether it’s private school, trade school, or college. Some states offer tax incentives when you contribute, but regardless of where you live, you’ll enjoy capital gains tax exemptions when you make profits on money held in a 529. Withdrawals are also tax-exempt as long as they are used for qualified studies. costs. That said, like IRAs, unqualified withdrawals can be taxed and penalized.
A taxable brokerage account is exactly what it sounds like: an investment account on which you have to pay taxes. This means that every time you sell an investment for a profit or receive income from a dividend, you will have to pay taxes. While this is undoubtedly a disappointment compared to the tax-advantaged status of IRAs and 529s, it comes with a major silver lining: there are no requirements dictating when or how you use your money. taxable brokerage account. You may also be able to take advantage of tax loss harvesting if your investments lose money in the short term.
2. Determine how much you can invest
Chances are you’re not about to get started on NVDA. But you may not know exactly what is the right amount to invest. Asking yourself the following questions can help you determine how much NVIDIA to buy.
- What is your budget ? Your investment budget should come from the money you have left over at the end of the month after paying your bills, saving an emergency fund, and contributing to your retirement. If you plan to invest in individual stocks before covering these bases, you could find yourself in a difficult financial situation if you have an unexpected need for the money you invest.
- What is the current price of NVDA? Although stock prices fluctuate over time, it is good to keep an eye on both the current price of the stock and its recent movement, as this can tell you how much you can buy. NVIDIA stock has been priced at just $130 per share and up to $330 per share in calendar year 2021. It’s important to keep this in mind because not all brokerages allow you to buy fractions of shares or parts of whole shares, and you could find yourself facing a very expensive investment if you have to buy whole shares. Fortunately, some brokerages, including Charles Schwab and Fidelity, and most investing apps, including Stash and Robinhood, allow you to buy fractional shares.
- What is your investment strategy? Are you going to make a big purchase or buy small pieces consistently over time? If you don’t already have a lot of cash ready to invest, you may prefer the latter method, also known as cost averaging. By buying the same dollar amount of the stock at regular intervals, regardless of the stock price at the time of purchase, you could pay less per share on average over the long term. You will also reduce the risk of buying a lot when prices are high and very little when they are low.
- What about your other investments? Presumably, NVIDIA won’t be your only investment. So how does this complement your other investments? Will it be one of many large-cap tech stocks in your portfolio, or will it represent your entire exposure to that market? Ensuring you have a diversified portfolio that spans multiple industries and different company sizes can help ensure balanced and healthy growth.
3. Evaluate NVIDIA’s finances
Despite impressive past performance, you don’t want to buy NVDA blind to its fundamentals and current financial situation.
To determine the financial health of NVIDIA, start with information on the investor relations site. The Securities and Exchange Commission (SEC) requires publicly traded companies to file annual reports on Form 10-K and quarterly reports on Form 10-Q. You can find this information on its investor relations site as well as on the SEC database.
Newbie investors will also find it helpful to turn to resources like Morningstar or your brokerage’s research offerings for expert analysis of NVIDIA’s quarterly and annual reports. These can help you better understand how the company’s finances have fared over time.
4. Place your order
To buy NVIDIA, log into your brokerage account or investment app and complete an order form. You’ll need to enter the company’s ticker symbol, NVDA, and the number of shares or dollar value you want.
You may have the option to specify an order type. The most common are market orders and limit orders.
With a market order, you will be asking to make a purchase at the current best price of the stock. This usually means you can expect an immediate sale, but there is no guarantee of a specific price. If you don’t have a choice in how you make your purchase, it’s probably a default market order.
In the meantime, if you want to be sure that you only buy NVDA at a certain price, you can choose what is called a limit order. This allows you to set a firm amount on how much you want to spend, and if the stock price exceeds this amount, your order will not go through.
Since NVIDIA trades on the Nasdaq exchange, you can buy it from 9:30 a.m. to 4:00 p.m. ET, Monday through Friday. You may also have access to pre and post market hours through your brokerage.
5. Assess NVIDIA Performance
Investing is not a one-time job. Even after you purchase your NVIDIA stock, it’s important to periodically review your stock’s performance so you can decide if it’s still meeting the goals you set for it.
Start by looking at how much NVIDIA’s price has risen over the past year to compare it to other assets in your portfolio, other tech stocks (those you own or others that are doing well) and to benchmarks like the Nasdaq Composite Index or the S&P 500. You can also review the financial information you viewed when you decided to buy NVDA to begin with and track how it has changed over time.
How to Sell NVIDIA Stock
Chances are you won’t keep your NVDA forever. Even long-term investors end up selling their holdings.
To sell your NVIDIA stock, all you have to do is log into your investment account, enter its ticker symbol and the amount you want to sell, and fill in a market or limit order.
I hope you are selling for a profit, which means you may owe taxes. If you’re selling from a taxable investment account and have made significant gains, you may want to speak with a tax professional to discuss the best ways to handle them.
Other ways to invest in NVIDIA
Buying individual shares of NVIDIA is just one way to profit from its growth. You can also take a safer, more diversified approach by buying exposure through index funds and exchange-traded funds (ETFs). These allow you to buy hundreds or thousands of companies at once, lowering your overall risk of losing money on your investment. You can buy index funds and ETFs the same way you can buy individual stocks.
NVIDIA is easy to find in many index funds and ETFs because it is part of both the S&P 500 and the Nasdaq 100, two major indexes that are frequently tracked with funds. NVIDIA represents 1.5% of most S&P 500 funds and 3.6% of most Nasdaq 100 funds.