How to buy Microsoft stock: Stock price quote

Artificial intelligence is all the buzz right now, but leading AI companies like OpenAI are often private or inaccessible to individual traders. As a result, many investors are turning to Microsoft (MSFT) – a key partner of OpenAI – as a viable alternative.

Moreover, Microsoft stock not only holds significant growth potential, but its established market presence and overall stability help mitigate excessive volatility, making it a safer bet for your portfolio. If you think MSFT aligns with your investment goals and you're interested in learning how to invest in Microsoft stock, we'll break down the essentials of smart MSFT investing and how to develop a trading plan.

How to sell Microsoft stock effectively

Selling Microsoft stock generally involves the same process as buying it through your brokerage account. To maximize your returns and avoid underselling, it’s crucial to use limit orders. A limit order allows you to set a minimum price at which you’re willing to sell, ensuring you don’t accept less than what you desire.

When preparing to sell, it’s important to check the stock price carefully. Keep in mind that prices can fluctuate significantly outside of regular market hours, which are from 9:30 AM to 4:00 PM EST. The prices you see during after-hours trading or in the premarket may not accurately reflect the value of the stock when the market is fully open. Therefore, relying solely on after-hours or premarket prices could lead to a misjudgment of the stock’s true value during regular trading hours. Always verify the latest price during market hours to ensure you’re making an informed decision.

How to purchase Microsoft stock

Fortunately, buying shares of well-established companies like Microsoft is straightforward.

Microsoft is a popular choice among investors, and its shares are widely available through most reputable brokerages. The stock’s liquidity means that buying and selling is generally smooth, with a tight bid/ask spread. To ensure you make a sound investment decision, it’s important to follow a structured approach when purchasing Microsoft stock.

Here’s a streamlined guide to buying Microsoft stock with minimal hassle:

1. Perform your analysis

Before making any investment, thorough research is crucial. Ask yourself if Microsoft stock is a good fit for you. Start by evaluating your overall investment strategy and goals. Then, delve into two key areas of due diligence: the industry and Microsoft’s operations, and the company’s financials and fundamentals.

First, look into Microsoft’s industry, focusing on current and future trends. For instance, Microsoft is heavily involved in the artificial intelligence (AI) sector through its partnership with OpenAI. However, consider potential risks such as competitive pressures, supply chain issues, and legal challenges that could affect Microsoft’s operations.

Next, analyze Microsoft’s financial health and valuation to determine if the stock is reasonably priced. Most investors use a combination of these analyses to make informed decisions, so ensure you understand both aspects thoroughly.

2. Set a budget

Determine how many shares of Microsoft you can afford based on the current stock price and your budget. Many brokerages offer fractional shares, allowing you to invest smaller amounts, often starting at $5. For example, $5 of Microsoft stock might equate to 0.01 shares. With fractional investing, focus on how much of your overall portfolio you want to allocate to Microsoft, rather than the number of shares.

It’s generally advised to allocate 5%–10% of your investment in established blue-chip stocks like Microsoft. For riskier investments, keep it to no more than 2% of your total portfolio. Also, if you hold index funds or ETFs that include Microsoft, like SPY, ensure your total investment reflects this.

3. Open a brokerage account

If you’re new to investing in Microsoft and don’t have a brokerage account, you’ll need to open one. Many brokerages cater to retail investors, but you should evaluate options based on several factors:

• What are the commission and fee structures? Many brokerages now offer commission-free trading, but confirm this before proceeding.
• Does the brokerage offer fractional shares?
• Are there any minimum balance requirements or maintenance fees?
• How responsive is customer service?
• Is cash settlement required?
• Does the brokerage offer a mobile app, or is trading only available on desktop?

Stick with well-known brokerages like Fidelity, Schwab, Robinhood, or Vanguard. Also, ensure that the brokerage is authorized to operate in your country.

4. Purchase Microsoft stock

After setting up your brokerage account, buying Microsoft stock is straightforward.

• Log into your brokerage platform.
• Locate the MSFT ticker symbol.
• Place your order.

While Microsoft is a highly liquid stock with a narrow bid/ask spread, using a limit order instead of a market order can help ensure you pay the price you intend and avoid overpaying.

5. Monitor your Microsoft investment

It’s important to keep an eye on your Microsoft investment, but avoid constantly checking for news. Regularly review your stock’s performance without letting short-term fluctuations dictate your strategy.

If you’re investing for the long term, staying invested generally outperforms trying to time the market by buying and selling based on news. Over time, holding the stock may yield better results than frequent trading, which can also have tax implications depending on your country.

To stay informed, consider subscribing to news alerts from the Microsoft Investor Relations Center for updates on SEC filings, press releases, and investor presentations. This will help you stay updated on Microsoft’s performance and understand market movements.

Understanding Microsoft stock splits and their impact on investors

While fractional trading makes buying smaller portions of shares accessible, there are times when a company may decide to split its stock if the share price becomes higher than desired. A stock split involves dividing one share into multiple shares, which doesn’t alter the overall value of your investment but can make shares more affordable.

The announcement of a stock split can sometimes lead to a surge in share price, as it may be interpreted as a positive signal, suggesting that the company's management believes the stock price is too high and anticipates future growth.

As for Microsoft, while it's possible that the company could consider a stock split, it seems unlikely in the near term. Historically, Microsoft has undergone nine stock splits, but the most recent one occurred in 2003. Currently, management appears content with the stock trading in the mid-triple-digit range.

Tech companies often reinvest all their additional profits into growth and expansion, typically leaving little room for stock buybacks or dividend payments.

However, Microsoft, being a more established company, does provide dividends. Currently, its dividend yield stands at a modest 0.70%.

Reinvesting these dividends can significantly boost your returns. For example, over the past five years up to June 6, 2024, Microsoft shares have increased by 242%. When including dividends reinvested during this period, the total return rises to 259%.