You might know Alphabet better by its largest subsidiary – Google – than by the name adopted in 2015. Google dominates the search industry and generates tons of cash flow every year. It has quickly risen to become one of the world’s largest companies. The remainder of Alphabet’s business units is called “other bets” and focuses on startup investing, self-driving cars, artificial intelligence research and hot air balloons delivering internet access, among other units.
Sales have grown substantially over the past few years. In 2021, Alphabet reported $257.64 billion in revenue. By 2023, revenue increased to $307.39 billion — a 19 percent rise in two years.
Here’s how to invest in Alphabet, as well as some key facts about the tech titan.
How to buy Alphabet stock
1. Analyze Alphabet and its financials
Analyzing a company’s competitive position and financials is probably the single hardest part of buying the stock, but it’s also the most important. The best place to begin is with the company’s Form 10-K, which is the annual report that all publicly traded companies must file with the SEC.
The 10-K can help you understand a lot about the company:
- How it makes money and how much
- Its assets and liabilities
- Its profitability trend over time
- The competitive landscape
- The various risks faced by the business
- The management team and how they’re incentivized
The annual report is a great first step at finding out about the company, but you’ll want to do more than this. You’ll want to study what other businesses are doing to compete, for example. It’s important to have a broader perspective on the industry.
For example, while Google is dominant in search, it faces other high-powered competitors as well. Microsoft runs its own search service, and Facebook is a huge player in advertising, too. Alphabet is also developing other innovative types of businesses, including Waymo, an autonomous driving operation.
2. Does Alphabet make sense in your portfolio?
Alphabet is a well-run company with a dominant position in an important and growing market. It’s a blue chip, meaning it’s one of the most well-regarded businesses. So the company will be a fit for almost any investor and it’s in many stock portfolios. Alphabet also recently started paying a small quarterly dividend. So you’ll want to consider the following questions:
- Does a growth company fit your needs?
- Will you be able to continue analyzing the business as it grows?
- Given the stock’s volatility, will you be able to hold on if it drops or even buy more?
If you’re buying just a little bit of Alphabet as a starter position or to get some skin in the game, these considerations might not matter as much as when you take a full position.
3. How much can you afford to invest?
How much you can afford to invest has less to do with Alphabet than with your own personal financial situation. Stocks can be volatile. So to give your investment time to work out, you’ll likely want to be able to leave the money in the stock for at least three-to-five years. That means you should be able to live without the money for at least that length of time.
Committing to holding the stock for three-to-five years is important. You’d hate to have to sell the stock when it’s near a low only to watch it rebound much higher after you exited the position. By sticking to a long-term plan, you’ll be able to ride out the ups and downs of the stock.
If you’re investing in individual stocks, you’ll want to keep the percentage of any single position between three and five percent. This way you’re not heavily exposed to one investment dragging down your portfolio’s returns. If the stock has more business risk, then you might choose an even lower percentage than this range.
In addition, rather than just committing a one-time sum of money to the stock, consider how you can add money to your position over time.
4. Open a brokerage account
While opening a brokerage account may sound like a difficult step, it’s actually quite easy, and you can have everything set up in 15 minutes or so.
Here is Bankrate’s list of best brokers for beginners.
After you’ve opened your account, you’ll want to fund it with enough money to buy Alphabet stock. But you can take care of this step completely online, and it’s simple.
5. Buy Alphabet stock
Once you’ve decided to buy Alphabet stock and you’ve opened and funded your brokerage account, you can set up your order. Use the company’s ticker symbol when you input your order. In the case of Alphabet, you have two choices, because it has multiple public stock classes – GOOG and GOOGL – the latter of which has voting rights. (This structure in itself is a hidden risk for many tech companies, especially new IPOs.)
Most brokers have a “trade ticket” at the bottom of each page, so you can enter your order. On the broker’s order form, you’ll input the symbol and how many shares you can afford. Then you’ll enter the order type: market or limit. A market order will buy the stock at whatever the current price is, while the limit order will execute only if the stock reaches the price you specify.
If you’re buying just a few shares – and Alphabet costs around $160 per share – then stick with a market order. Even if you pay a little bit more now for a market order, it won’t affect the long-term performance much if the stock continues to perform well.
Bottom line
Buying a stock can be exciting, but success won’t happen overnight. Still, investing in stocks is one of the best ways to earn passive income over time, and investors should take a long-term perspective on their investments. Furthermore, they should consider taking advantage of dollar-cost averaging if they believe in the stock for the long haul.
With dollar-cost averaging, investors add a set amount of money to their position over time, and that really helps when a stock declines, allowing them to purchase more shares. High-flying stocks can dip from time-to-time, so the strategy can help you achieve a lower buy price and higher overall profits.
Alphabet FAQs
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Over the trailing 12 months, the company reported a profit of $87.66 billion on $328.28 in revenue.
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Alphabet makes effectively all of its money through its well-known Google subsidiary, which includes Google Search, YouTube ads, Google Network and Google Cloud.
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The company’s largest competitors include other big tech giants such as Apple, Microsoft, Amazon and Meta Platforms.
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A U.S. judge recently ruled that Google violated antitrust laws to become the world’s top search engine. Google has an almost 90 percent share of the market for search services, according to the ruling. Justice Department officials could eventually force the company to sell off its Android, Chrome or AdWords segments in order to reestablish competition.
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Alphabet has three classes of stock: Class A stock with voting rights has about 5.86 billion shares, Class B stock with 10 times the voting rights as Class A and held only by founders has 885 million shares and Class C with no voting rights has 6.59 billion shares, as of July 16, 2024.
— Bankrate’s Logan Moore contributed to an update of this story.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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