Netflix is a popular American streaming service that offers a wide range of original and acquired movies and TV shows across different genres. It’s available internationally in multiple languages.
As of October 2023, Netflix ranks as the 24th most-visited website globally. The majority of its traffic, 23.66%, comes from the United States, followed by the United Kingdom at 5.84% and Brazil at 5.64%.
If you’re considering investing in Netflix, there are two primary approaches: you can either purchase the stock directly or invest in ETFs. This guide will provide you with all the information you need to get started.
How to Buy Netflix Stock
Step 1: Open a Brokerage Account
To invest in Netflix stock, you need to open a brokerage account. If you don’t have one, you can check out our curated list of the best online brokers to help you start your search.
Brokers act as the intermediary between you and the stock market. They execute your trades, buying and selling stock on your behalf. There are a wide range of brokerage options available, including full-service brokers and robo-advisors.
Many brokers now offer fee-free stock trading. But before you start, check if there are any hidden fees or if you need to have a minimum amount in your account. To determine the type of account you need, consider your own investment goals.
- For long-term retirement savings, consider a Roth for tax advantages. If you’ve held your Roth IRA for at least five years, you can withdraw money without paying taxes or penalties. Unlike a Traditional IRA, a Roth IRA doesn’t have mandatory minimum withdrawals.
- If you’re saving for general goals like building wealth or a home down payment, a taxable investment account might be a more viable option. Unlike an IRA or a 401(k), you can withdraw your money at any time, for any reason, with no tax or penalty from a brokerage account.
Step 2: Research Netflix’s Fundamentals
Before investing in any company, including Netflix, it’s important to do thorough research. Here’s what you should do:
Access Netflix’s financial reports, like the annual 10-K and quarterly 10-Q filings. Like all publicly-traded companies, Netflix is required to file financial statements with the U.S. Securities and Exchange Commission (SEC). You can view its annual reports and quarterly financial statements on its investor relations site.
Check out expert analyses from trusted sources like Fidelity, Morningstar, or Forbes. Brokerage firms, including those offering major stocks like Netflix, also provide valuable research and commentary. This will give you insights into Netflix’s financial health, growth prospects, and potential risks.
Some factors to keep in mind when reviewing Netflix’s financial statements include its stock price fluctuations, competition, and its ability to produce original content. It’s also a good idea to compare Netflix’s financial performance with that of other companies in its industry.
Step 3: Decide How Much to Invest
Before you start investing in Netflix stock, set your investment budget. Consider these factors:
- Budget: Make sure your investment doesn’t interfere with your monthly expenses, emergency funds, and retirement savings.
- Netflix’s Stock Price: Understand its valuation and decide on the investment amount. Netflix‘s stock price fluctuates, but some brokerages allow you to buy fractional shares.
- Investment Strategy: Decide between lump-sum purchase or regular investments using dollar-cost averaging.
- Portfolio Integration: Assess Netflix‘s role in your overall investment goals. Experts suggest limiting exposure to individual stocks like Netflix to a maximum of 5% of your total portfolio.
Step 4: Decide Your Order Type and Place It
With your research complete, it’s time to buy Netflix stock. Here’s how:
- Access your brokerage account online or through the broker’s mobile app.
- Netflix’s ticker symbol is NFLX. Enter this symbol to locate the stock.
- Decide the number of Netflix shares you want to purchase or the dollar amount you intend to invest.
- When you purchase Netflix stock, you can choose to place the order as a limit order or a market order. A market order is processed immediately at the current price, while a limit order is only processed when the stock reaches a price you set. Limit orders can be a good choice if you expect the price to drop in the near future.
Remember that Netflix is traded on the Nasdaq exchange, and trading hours are typically from 9:30 a.m. to 4:00 p.m. ET. If your brokerage offers pre-market and after-market trading, you can place orders during extended hours.
Step 5: Monitor Your Investment
To effectively manage your investments, set up a routine to review your portfolio’s performance:
- Schedule regular check-ins, whether monthly, quarterly, or annually, to ensure the company continues moving in a positive direction.
- Compare Netflix’s performance to broader market benchmarks like the S&P 500 and Nasdaq Composite Index to gauge how it fares in the broader market context.
- Watch Netflix’s financial data in its public filings to assess how the company handles its finances over time.
Keeping an eye on your investment allows you to make any necessary changes based on market shifts or your personal financial goals. For instance, if the value of your Netflix stock goes up or down dramatically, it might be a good idea to reassess your investment strategy.
To make things even easier, consider using an investment portfolio app. These handy tools let you manage all of your accounts in one place, track your portfolio’s performance, and analyze factors like risk and diversification.
How to Sell Netflix Stock
When the time comes to sell your Netflix stock, follow these steps:
- Log in to your brokerage account.
- Enter the number of Netflix shares you wish to sell or the dollar value you want to receive.
- Similar to buying, you can select market orders for immediate execution at the current price or use other order types depending on your selling strategy.
- If you sell Netflix shares at a profit (capital gains), be prepared to pay capital gains taxes unless they are held in a tax-advantaged account. The amount of tax you owe may vary based on how long you held the shares. Consult with a tax professional to plan for those taxes before placing any sale orders.
Other Investment Options
Investing solely in individual stocks like Netflix can be risky due to stock price volatility. Here are alternative investment options that allow you to invest in Netflix while managing risk:
1. Index Funds: Index funds or exchange-traded funds (ETFs) offer a diversified portfolio, which can provide a safer investment option. These funds invest in hundreds or even thousands of companies at once, giving you exposure to a broad range of the market.
2. Exchange-Traded Funds (ETFs): ETFs are similar to index funds but trade like individual stocks. Some ETFs focus on technology sectors, which often include Netflix as a holding. One of Netflix’s biggest holders is the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100. Other options include the Fidelity MSCI Communication Services Index ETF (FCOM) or the Simplify Volt Pop Culture Disruption ETF (VPOP), which invests in companies that disrupt and innovate the entertainment industry.
3. Mutual Funds: Look for mutual funds with a focus on entertainment, streaming services, or technology sectors. These funds may include Netflix in their portfolio, offering diversification and professional management.
Learn more: Best Investment Options
