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How to Buy Amazon for the Cost of a Penny Stock

By Maurie Backman - Jun 4, 2021 at 5:36AM

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Amazon may be expensive, but here's how you can buy it on the cheap.

There are plenty of good reasons to invest in Amazon (AMZN -2.86%). Not only has the online retail giant been expanding into areas such as the pharmacy and grocery markets, but its share price has consistently increased over the past five years, save for a few dips and blips along the way.

But investing in Amazon may not seem feasible if you're on a tight budget and don't have a ton of money to funnel into a brokerage account. As of this writing, Amazon is trading at $3,187.01 a share.

Not only is that a lot of money to come up with, but it's also a lot of money for a single share of one company's stock. Still, if you're eager to add Amazon to your portfolio, there's an easy way to do it, even if funds are limited on your end.

Pie with image of hundred-dollar bill cut into pieces

Image source: Getty Images.

It's all about fractional investing

These days, a large number of brokerages are making it possible for investors to put money into fractional shares. When you buy fractional shares, you get to purchase a piece of a share of stock instead of a whole share.

Not every brokerage house allows for fractional investing, and not every stock can be purchased in fractional form. But if you only have a limited amount of money to invest with, fractional shares are a great way to build a diverse portfolio and add stocks to your personal collection you otherwise couldn't afford.

What about penny stocks?

If you don't have a lot of money to invest with, you may be tempted to put your money into penny stocks, which generally trade for under $5 a share. If you have some money to work with, however, you could probably buy a bunch of full shares of penny stocks instead of buying partial shares of a more expensive stock.

Still, fractional shares are a better bet than penny stocks for one big reason -- they let you invest in proven companies with solid track records and excellent growth potential. Many of the companies behind penny stocks are newer businesses that could succeed or fizzle -- it's hard to know. As such, penny stocks are generally considered to be pretty speculative.

The truth is that if you have a spare $50 to work with, you might just decide to throw it into penny stocks and see what happens, and if you lose that $50, so be it. But before you go that route, it pays to consider putting your money into well-established companies, instead.

Amazon has been a powerhouse for years and isn't slowing down, but its share price makes it cost-prohibitive for a lot of investors. With fractional shares, it may now be back on the table.

Of course, you don't have to put your money into Amazon if the company doesn't align with your investing strategy or you simply don't like it. The point, however, is that you shouldn't shy away from buying expensive stocks just because money is tight. Fractional-share investing opens the door to a world of opportunity, so don't hesitate to go after those companies that have share prices that are normally a bit too rich for your budget.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Maurie Backman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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