How To Buy Netflix (NFLX) Stock

1. Selecting a Brokerage

To invest in Netflix or any stock, a brokerage account is essential. Brokers act as intermediaries, executing trades on the stock market. Whether for long-term financial goals like retirement or more immediate objectives, brokers offer access to the market.

There are several brokerage types available, including full-service brokers and robo-advisors. It's generally recommended to choose a brokerage that offers low fees and investment minimums. Exploring lists of top investment apps and online brokers can help in finding the right fit.

2. Opening an Account

Brokerages typically offer different types of accounts. These can include RRSPs for retirement, RESPs for education savings, and TFSAs for tax-free individual savings.

• Retirement Accounts (RRSPs): These accounts provide tax advantages for retirement savings, but withdrawing funds before age 71 incurs withholding and income taxes.
• Taxable Accounts: While they don't offer tax benefits, taxable brokerage accounts allow for flexibility, with no limits on withdrawals or contributions, making them a useful option for general savings or investments.

3. Researching Netflix

Before investing, it's important to research Netflix's financials and ensure the company aligns with your goals. Publicly traded companies like Netflix file financial reports, which are worth reviewing to understand the company’s performance.

Several factors to consider include:

• Volatility: Netflix’s stock has fluctuated significantly, reaching highs of $887.08 and dropping to $429.27 in recent years. As of early 2024, it is trading around $635.
• Price per Share: With fractional share options available, investing in Netflix has become more accessible for those not wishing to purchase full shares.
• Competition: Netflix now faces strong competition from companies like Disney+ and Peacock, which have forced it to invest more in original content.

4. Placing an Order

To purchase Netflix shares, log into the chosen brokerage platform, enter Netflix’s ticker symbol (NFLX), and decide the number of shares or the dollar amount to invest.

There are two main types of orders to choose from:

• Market Order: Executes the purchase immediately at the current market price.
• Limit Order: Executes only when the stock reaches a price that is predetermined, providing more control over the purchase price.

Netflix trades on the Nasdaq exchange, with standard hours from 9:30 a.m. to 4:00 p.m. ET, Monday through Friday, and options for pre-market and after-hours trading.

5. Watch for Currency Conversion Fees

For Canadian investors buying U.S. stocks like Netflix, currency conversion fees (1% to 4%) will apply unless a U.S. dollar bank account is used. Alternatively, Norbert’s Gambit can be employed to avoid conversion fees by trading interlisted stocks or ETFs.

6. Monitoring Netflix’s Performance

Even for long-term investments, it’s beneficial to regularly review performance by comparing it with stock market benchmarks like the S&P 500. Investment portfolio apps can assist in managing multiple accounts from different brokers.

7. Having an Exit Plan

At some point, selling Netflix shares may be necessary. To do so, enter the brokerage platform, input the ticker symbol, and specify the number of shares to sell.

Selling decisions may be influenced by tax considerations, so consulting with a tax professional can help with capital gains tax strategies. For Canadians, a W-8 BEN form must be filed to avoid a 30% withholding tax on dividends (reduced to 15% with the form). Capital gains taxes are generally calculated on 50% of the investment’s growth.

Other Investment Options

Netflix’s volatility may encourage a diversified approach through index funds or ETFs. Many ETFs, such as the BMO Global Communications Index ETF, include Netflix among their holdings, providing exposure to Netflix without the risk of investing in individual stocks.