How To Buy Netflix (NFLX) Stock – Forbes Advisor Canada

Whether you’re obsessed with the latest show or you just love movies, there’s no denying that Netflix has revolutionized how we watch television.

Today, Netflix has over 222 million paying members in 190 countries. Since its initial public offering (IPO) in 2002, NFLX’s stock price has skyrocketed. Consider this: Netflix had a market capitalization of about $3.9 billion ($3 billion USD) in January 2010 compared to over $195 billion ($150 billion USD) today.

How to Buy Netflix (NFLX) Stock

1. Choose a Brokerage

To invest in Netflix—or any other stock—you need a brokerage. Brokers are the intermediary between you and the stock market, meaning that they execute your trades, buying and selling stock. You can use a broker to invest for long-term goals, such as retirement, or aim for short-term profits.

There are a wide range of brokerage options available, including full-service brokers and robo-advisors. In general, look for a broker that offers low fees and investment minimums so you can start investing right away. You can use our picks for the best investment apps and best online brokers to kickstart your search.

2. Open an Account

Depending on the brokerage you choose, you may have several different account options. Brokers will likely offer RRSPs for retirement, RESPs for saving for your child’s education and TFSAs for growing your individual savings tax-free.

  • Retirement accounts. If you choose to open a Registered Retirement Savings Plan, you can get tax advantages when you save for retirement. But RRSPs come with one big limitation: Withdraw money before the end of the year you turn 71 and you’ll owe a withholding tax, as well as the income taxes that kick in at whatever age you withdraw funds.
  • Taxable accounts. Taxable brokerage accounts may not offer any tax benefits, but they do have some advantages. You can withdraw funds at any time, for any reason, with no cap on how much you can invest, giving you flexibility when it comes to accessing your investment proceeds.

3. Research Netflix

Before investing your money in Netflix or any other stock, you need to do your homework. If you’re going to buy stock, you should know about the company’s fundamentals and ensure it has a business model you think can succeed.

Like all publicly-traded companies, Netflix is required to file financial statements with the U.S. Securities and Exchange Commission (SEC). You can view its annual reports and quarterly financial statements on its investor relations site.

When reviewing those documents, keep the following factors in mind to help you decide how much money to invest:

  • Volatility: Netflix’s stock price has fluctuated a great deal over the past few years. In 2021, its price was as high as $887.08 ($682 USD) As of March 2022, it fell to about $429,27 ($330 USD). In Netflix’s annual report, it cautions that its price continues to be volatile due to factors beyond its control.
  • Price per share: NFLX isn’t as expensive on a per-share basis as some high-flying tech stocks. Some brokers allow investors to purchase fractional shares—that’s the ability to buy a proportional slice of a single stock—but others require you to invest enough money to buy a whole share. If that’s the case, using a strategy like dollar cost averaging can be more challenging since you’ll need to save a chunk of cash before you can buy a share.
  • Competition: Once upon a time, it was about the only streaming video service out there, but today Netflix is facing stiff competition in the streaming space. For example, NBC pulled episodes of The Office and Parks and Recreation from Netflix when it launched Peacock, and Disney pulled its Marvel movies and shows when it launched Disney+. Competitors like this, even Crave in Canada, are forcing the company to spend even more to produce original content.

4. Place an Order

If you decide to buy Netflix stock, open up your trading platform of choice and enter Netflix’s ticker symbol—NFLX—and how many shares you wish to purchase. If you’re using an investment app that offers fractional share investing, you can enter the dollar amount you want to invest in Netflix instead.

You can usually choose to place the order as a limit order or a market order. Market orders, when placed during normal trading hours, are processed immediately at the current price. By contrast, limit orders are only processed when the stock reaches a price you set and can be a good choice if you expect the price to drop in the near future.

Netflix is traded on the Nasdaq stock exchange, the second-largest stock exchange in the world. The Nasdaq’s trading hours are Monday through Friday from 9:30 a.m. and 4:00 p.m. ET. The Nasdaq does have pre-market and after-hours trading beyond its core hours.

5. Watch Out For Currency Conversion Fees

Buying a U.S. stock from Canada likely means converting Canadian dollars to U.S. dollars (and back when you sell), unless you have a U.S. dollar bank account at a Canadian bank and only buy American stocks with American funds. Otherwise, you will be charged 1% to 4% of the stock’s value on both sides of the transaction by your brokerage as part of their service of converting your currency.

The only other way to bypass these fees, besides reserving U.S. dollars for U.S. stocks, is to perform Norbert’s Gambit.

This so-called gambit is when you buy a stock or ETF that’s interlisted on American and Canadian stock exchanges. You buy Canadian shares of that stock or ETF, then you ask your brokerage to “journal over” your Canadian shares and turn them into American shares of the same stock, you then sell your American shares in U.S. currency and can use the U.S. dollars that result to purchase any American stock or ETF you want, like NFLX, without converting currency. You pay commission for both transactions, but save on the conversion fees.

6. Monitor NFLX’s Performance

Even if you plan on holding onto your Netflix stock over the long term, it’s a good idea to review your investment’s performance periodically. You can compare its performance to that of a stock market index like the S&P 500 to see how it measures up.

If you have multiple investment accounts with different brokers, you can use an investment portfolio app to manage all of your accounts in one place.

6. Have an Exit Plan

Whether you intend to hold onto your Netflix shares for a few years or a few decades, there will come a time when you decide to sell your shares.

As with purchasing stock, you can sell your shares by entering your broker’s platform and typing in the ticker symbol and the amount you want to sell. You can sell at its current price, or you can place an order to sell only when the stock reaches a certain price.

If your investment earns a profit, you may owe capital gains taxes, so consider talking with a tax professional about how to plan for those taxes before placing any sale orders.

When it comes to Canadians and taxes, you will be subject to a 15% withholding tax if your U.S. investment produces a dividend, as long as you file a W-8 BEN with your brokerage (30% withholding tax if you don’t). You won’t be taxed by the IRS at all if your investment vehicle is inside an RRSP because this particular registered account is recognized by America, which isn’t the case for every registered account in Canada.

You will only owe capital gains on the growth of your investment on your Canadian income tax, as long as the company in question doesn’t have U.S. real estate as their main asset. With Canadian capital gains, you will only pay 50% of the growth value of the investment.

The only other circumstance under which you would possibly owe tax is if you make $5 million USD on your U.S.-based investments, you will owe estate tax to the IRS when you die.

Other Ways to Invest in Netflix

Netflix’s performance over the past 10 years has been volatile. While it experienced incredible growth for several years, its price has decreased by 25% over the past 12 months.

With that volatility in mind, you may want to consider investing in index funds or exchange-traded funds (ETFs) rather than individual stocks. These funds invest in hundreds or even thousands of companies at once, giving you a ready-made, diversified portfolio.

As a large company, many funds can give you exposure to Netflix. More than 250 ETFs have Netflix as one of their holdings. In Canada, this can include the BMO Global Communications Index ETF (TSX: COMM).

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