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. Although the 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 the growth stock today.
How to Buy Square (SQ) Stock
Before deciding whether to make a move on Square, you must first know 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 beginner investors. 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-by-Step Guide
These are the steps you have to perform if you want to buy Square stock.
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.
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.
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.
Execute Your Trade
After going 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.
Best Online Stockbrokers
Below is a list of the best brokers to get you started.
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 before the pandemic.
Square stock soared during the pandemic but began its descent in 2022. The battered financial company now trades at a more reasonable price point but still achieves a good growth rate. Square peak-to-trough exceeded 80% and Jack Dorsey is taking a more active role in the company.
Pros of Buying SQ Stock
These are some of the advantages of buying Square 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
Although Square stock offers several advantages, it is important to consider these disadvantages before accumulating shares.
Frothy Market Conditions
Though SQ stock performed remarkably well in 2020 and 2021, the broader bull market has been stretched. Like anything in life, nothing goes up forever. You run the risk of holding the bag, especially if you purchase too many shares.
High Valuation
Square is a speculative pick that can continue to decline if the Fed raises interest rates or consumer spending takes more hits. Square's high valuation makes it more vulnerable to macroeconomic uncertainties.
Unbanked Worries
According to the Federal Deposit Insurance Corporation, 5.9 million households were unbanked in 2021. Recessions tend to increase the unbanked rate, which clashes with Square's overall strategy of continuously integrating digital payment solutions.
New Challenges
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.
Frequently Asked Questions
Is Square stock risky?
Square stock is a risky growth stock that can generate outsized returns for long-term investors.
Is Square stock a buy?
Square stock has dropped significantly since the end of 2021. However, some investors may see this as an opportunity to buy shares while the price is low. Square continues to achieve good top-line growth but has to address its net losses.
Will Square stock ever recover?
Square continues to grow each year. Patient investors may see shares reclaim their all-time highs after several years. Some tech stocks have reclaimed their highs after slumping in 2022, so it is possible.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.