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Square (NYSE: SQ) offers secure credit card processing solutions and point-of-sale tools to level the playing field and allow smaller businesses to compete with large companies. Over the last 5 years, SQ stock has delivered phenomenal gains.
Although the coronavirus pandemic negatively affected virtually all industries, independent entrepreneurs – Square’s core clientele – have suffered disproportionately. Prospective SQ buyers should approach this technology firm cautiously.
Learn more about Square, and how you can buy Square (SQ) stock today.
How to Buy Square (SQ) Stock
Before deciding whether to make a move on Square, you must first familiarize yourself with the process of how to buy stocks. You should understand key concepts of the investment market before putting your hard-earned money at risk.
Growth stocks like SQ can be less forgiving to the beginner investor. Primarily, this is because Square does not pay a dividend, so you don’t have an incentive to hold shares without the prospect of capital gains or an increase in value asset.
As a result, you are dependent on market whims to see a return on your investment, likely leading to greater exposure to boom-bust cycles.
Step 1: Pick a brokerage.
Brokerages act as intermediaries and allow you to purchase SQ and shares of other publicly-traded companies. As the central hub for your investing activities, it’s important to pick the best broker for your needs.
This comes down to personal preference and anticipated growth in your investing endeavors. Thanks to the popularity of stock trading sparking competition among brokerages, the industry standardized certain attractive benefits, such as commission-free trading.
Your selection process should revolve around your requirements. If you have a busy day-to-day schedule, a convenient mobile trading app may offer the most appropriate solution. If you might trade for a living, choose a more comprehensive platform.
Below is a list of best brokers to get you started.
Step 2: Decide how many shares you want.
Prior to executing your trade, establish a dollar amount to dedicate to SQ stock. This figure depends on factors like your risk tolerance and budget size. It’s also important to understand your investment goals.
For instance, if you’re close to retirement, an overwhelmingly large stake in SQ stock might not be appropriate because it doesn’t offer passive income (dividends). If you have plenty of time to grow your portfolio, Square’s long-term relevancy and upside potential may be attractive.
Once you’ve got a figure that works for you, take this dollar amount and divide it by the target stock’s market price. The whole number is the share count you can purchase.
Step 3: Choose your order type.
Unlike many other transactions between buyer and seller, a publicly-traded security’s price constantly fluctuates during normal session hours.
Here are the basic terms you need to understand to execute your trades.
- Bid: The bid is the highest price that a buyer is willing to pay for a stock. It is always lower than the ask.
- Ask: On the flipside, the ask is the minimum price that a seller is willing to take. It is always higher than the bid.
- Spread: The spread is the difference between the bid and ask. The bid-ask spread is where market makers earn profits for their function in acquiring and distributing shares to investors. In addition, the spread represents market liquidity, with narrow spreads indicating high liquidity while wide spreads suggest a less liquid market.
- Limit order: To maintain full control and transparency over your trades, you should select a limit order, which only executes an order at your predetermined price. However, the downside to limit orders is that no guarantee exists that the target stock will reach said price.
- Market order: To overcome the limitation of the limit order (i.e. no guarantee of fulfillment), you may use a market order to buy shares. If you place them within the session, market orders execute at the next available price. But the downside is that they transact deals at the least favorable terms – buy orders on the ask, sell orders on the bid.
- Stop-loss order: Market volatility can quickly erode the value of your portfolio. To protect against this ever-present risk, you can use a stop-loss order, which exits you out of your position at either a predetermined price or the next available price, whichever comes first. However, if a new session opens much lower in price than the prior session, you could incur a much steeper-than-anticipated loss.
- Stop-limit order: As the name implies, stop-limit orders exit you out of your position but only at a predetermined price. While this prevents the ugly surprises associated with gap-down sessions, you should note that like limit orders, there’s no guarantee that your target stock will reach the predetermined price.
Step 4: Execute your trade.
Having gone through the basics, it’s time to execute your trade. The most straightforward order type is the market order, which you can deploy through the below steps:
- Select action type (buy or sell)
- Enter the shares you wish to acquire (or sell)
- Send the request
Limit orders are identical except that you need to input your desired price. While you enter your share count, the brokerage platform will prompt you to enter your limit price. Then place the order.
SQ Stock History
Because Square’s merchant solutions free up time for entrepreneurs to actually run their businesses, forward-thinking investors bid up SQ stock to justifiable heights.
However, as we digest the governmental response to the unprecedented COVID-19 pandemic, more and more of those same investors will be tempted to take profits. That’s probably why you see the price action of SQ stock becoming more pensive in recent sessions.
Prospective buyers should be careful in their approach. You may buy shares now but you should also consider keeping the powder keg dry to advantage possible discounts.
Pros to Buying SQ Stock
The great equalizer: Thanks to Square’s myriad merchant services, it’s now possible for small, independent companies to compete with larger rivals. Additionally, many entrepreneurs have too much going on. Square allows business owners to enjoy digital delegation that allows them to concentrate on running and growing their enterprise.
Going cashless: Even before the pandemic and its resultant premium on contactless services, Americans (especially younger generations) gradually reduced the amount of cash they carried on hand. And many now avoid dirty physical currency due to the health crisis. Square offers immediate and long-term relevance via its digital payment processors.
Visionary: Square was one of the first mainstream companies to adopt cryptocurrencies and continues to support the virtual currency revolution. This type of visionary leadership is risky, to be sure. However, these risks also make SQ stock compelling for the long haul.
Cons to Buying SQ Stock
Frothy market conditions: Though SQ stock performed remarkably well over the trailing year, the broader bull market appears stretched. Like anything in life, nothing goes up forever. You run the risk of holding the bag, especially if you purchase too many shares.
Long way from recovery: While the declining coronavirus infections and the vaccine rollout offers investors encouragement, the economy still has a dark cloud hanging. And small businesses vital to Square’s long-term success have been disproportionately impacted by the pandemic. This could hurt Square’s growth trajectory.
Unbanked worries: According to the Federal Deposit Insurance Corporation, 7.1 million households were unbanked in 2019. Recessions tend to increase the unbanked rate, which clashes with Square’s overall strategy of continuously integrating digital payment solutions.
Like many innovative companies, Square is transformative because it delivers relevant services to help all businesses catch up to the realities of our digital economy.
The impact of the pandemic, particularly the push for contactless transactions, benefitted Square in many areas but has also imposed new challenges on Square.
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