Thinking of celebrating Cinco De Mayo with a margarita? Depending on where you live, whether or not you make the drink yourself, and how fancy you choose to get, your festive drink could set you back anywhere from a few bucks to over $20.
After a tough year, we could all use a little celebrating — so splurging on a few margaritas may well be a great use of your cash. But did you know that you could actually invest in some of the biggest companies in the world for the same price as a fancy mixed drink?
And that includes Amazon (AMZN -0.23%), even though the company's share price is over $3,400.
Here's how you can buy into Amazon for the cost of a margarita
Buying Amazon stock for margarita money might be easier than you think, since a growing number of online brokerage firms now offer fractional shares.
Fractional shares make it possible to buy partial shares of a stock. In the past, they were typically available only in limited circumstances, such as if you were awarded a part of a share after a stock split. But now most big-name brokers have begun offering them as an option for anyone.
If your broker offers fractional shares, you can simply specify the amount of money you want to invest, rather than having to trade a number of full shares. Before fractional shares became commonplace, you had to put in an order for a certain number of shares, and couldn't put in a buy order for less than one. That means you would have been closed out from purchasing Amazon stock if you didn't have over $3,400 to spend.
But with fractional shares, even if you only have $20, you can afford .0059 of a share of Amazon. And it's OK to buy such a small portion of a share, because you'll still enjoy the same percentage gains as any other investor — and most brokers have eliminated commission fees, so any potential profits shouldn't be eaten up by them.
The elimination of commission fees by most brokers and the ability to trade fractional shares have made it easier for the average person with a small budget to become a successful stock trader if they put in the work. The little guys can win — and that's a great thing to take advantage of on Cinco de Mayo. After all, while the history may have been lost, the holiday actually commemorates the Mexican army's unlikely defeat of French forces that far outnumbered them.
Now, whether you should add Amazon to your portfolio is a different question. Before sinking any money into a stock, it's a good idea to do some research into the company's business model, competitive advantage, and potential for growth. You'll also want to think about how your purchase of Amazon shares will fit into your overall portfolio, since you want a diversified mix of different investments.
In other words, don't buy Amazon just because you were impressed with the speed with which they delivered your margarita mix.
Fractional shares give the average investor a chance to purchase any publicly traded stock they want and not be constrained by price. Take advantage of this and develop a sound investment thesis so you can pick stocks that you are truly confident will perform well for you over time. The sweet taste of the financial freedom this can lead to is better than even the best margarita.