Does Amazon deserve a place in your Roth IRA before the stock split? | Smart Change: Personal Finance

(Charlene Reinhart, CPA)

Amazon (NASDAQ: AMZN) First Quarter 2022 earnings call Set to take place on April 28, many investors are tuning in to see if the e-commerce giant deserves a place in their portfolio. Last month, Amazon’s board of directors gave the company the green light for a 20-for-1 stock split. The move sparked a lot of excitement among investors because the company hasn’t made a split since the internet boom.

If you have some extra cash stashed in your Roth IRA (Individual retirement account), you may be wondering if Amazon shares should be charged. But before you dive into the business, you should do your own research on the core business and determine if it makes sense to add the company to your retirement portfolio.

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The 411 on Amazon’s stock split

Amazon sparked a lot of excitement among investors when the company announced plans to do 20 for 1 stock split. This means that shareholders will see their original shares cut into bite-size pieces. Let’s say you own one share of Amazon stock. You will see an additional 19 shares in your account after the shares split.

If you haven’t been following Amazon’s stock split schedule, here are some dates to consider.

  • March 9, 2022: Amazon has released the news regarding its highly anticipated stock split.
  • May 25, 2022: Shareholders will have the final say when they vote on the stock split at the 2022 Annual Shareholder Meeting on this date.
  • May 27, 2022: If a stock split is approved, all shareholders registered by May 27 will participate in the stock split.
  • June 3, 2022: This is the day of the stock split. Amazon will give shareholders an additional 19 shares of stock for every 1 share in their account.
  • June 6, 2022: If you want to buy stock at a lower price, Amazon stock will be in the market at about 1/20 of its pre-divided price. If Amazon stock traded at $3,000 per share before the split, the entire Amazon stock would be around $150 after the split.

Don’t get caught up in the stock split

Although the days leading up to a stock split can be exciting, you should know that the value of your shares will not change. Let’s say you own one share of Amazon worth $3,000. You will own 20 Amazon shares at $150 each after the stock split. The total value of Amazon shares is still $3,000.

A stock split shouldn’t be the final factor in deciding whether to buy Amazon stock. Here are some Company-focused questions to consider:

  • How does Amazon make the majority of its money? What is different company revenue streams?
  • Who are their best competitors?
  • What supply chain challenges can interfere with a company’s revenue, and is the company in a position to overcome this?
  • Could you Annual Amazon Peak And other promotions will increase the company’s sales?

Is Your Roth IRA the Best Place for Amazon Inventory Collection?

if I were rising On Amazon, this does not necessarily mean that you should add the company’s stock to Ruth Iran. Although a Roth IRA allows you to pay income tax up front and collect tax-free income later, this account comes with restrictions that can limit the number of Amazon shares you can add to your account.

For 2022, you can only contribute $6,000 to your Roth IRA if you are under 50. If you bought an entire share from Amazon for $3,000, it would occupy 50% of your portfolio if you only had $6,000 in your Roth IRA. This would interfere with diversifying your trading portfolio and put you at a very disadvantage if the company moved. You should avoid leaning on one stock if you want to sleep peacefully at night.

Fortunately, buying all of the stock isn’t the only way to get Amazon into your Roth IRA. you can buy broken arrow And taste the Amazon in your account. Let’s say Amazon is $3,000. You can use $300 and get 1/10th a share from Amazon. Fractional shares can also give you a full share after a 20-for-1 stock split. Your 1/10th share of Amazon will turn into two full shares after the stock split.

Does Amazon Fit Your Roth IRA?

Although it is tempting to invest your money in the hottest stocks on the market, it is important to step back and do your research before investing. You want to make sure that the investment aligns with your goals, risk tolerance, and time horizon. You also want to make sure that you don’t set yourself up for failure by relying on one company to provide for all of your needs.

If Amazon is a good fit for your business portfolio, you can add it to a Roth IRA or go shopping with a taxable brokerage account and bypass the restrictions.

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John Mackie, CEO of Whole Foods Market, an Amazon company, is a member of The Motley Fool’s Board of Directors. Charlene Reinhart, CPA Amazon owns. Motley Fool is owned and recommended by Amazon. Motley Fool owns a profile Disclosure Policy.

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