You may know Alphabet better by its largest subsidiary – Google – than by the name it adopted in 2015. Google dominates the search industry and generates tons of cash flow every year. It has quickly risen to become one of the largest companies in the world. Alphabet’s remaining businesses are known as “Other Bets” and focus on investments in startups, self-driving cars, artificial intelligence research and hot air balloons that provide internet access, among other things.

Revenue has risen sharply in recent years. In 2021, Alphabet reported revenue of $257.64 billion. By 2023, revenue rose to $307.39 billion – an increase of 19 percent in two years.

Here’s how to invest in Alphabet and some key facts about the tech giant.

How to buy Alphabet shares

1. Analyze Alphabet and its financial figures

Analyzing a company’s competitive position and finances is probably the hardest part of buying stocks, but also the most important. The best place to start is with the company’s Form 10-K, the annual report that all publicly traded companies must file with the SEC.

The 10-K form can tell you a lot about the company:

• How do you earn money and how much
• Its assets and liabilities
• The development of profitability over time
• The competitive environment
• The various risks to which the company is exposed
• The management team and its incentives

The annual report is a good first step to learn more about the company, but you should do more than that. For example, you should look at what other companies are doing to compete. It’s important to have a broader perspective on the industry.

While Google is the leader in the search engine space, it also faces other powerful competitors. Microsoft operates its own search service and Facebook is also a big player in the advertising space. Alphabet is also developing other innovative businesses, including Waymo, an autonomous driving company.

2. Does Alphabet make sense in your portfolio?

Alphabet is a well-run company with a dominant position in an important and growing market. It is a blue chip, one of the most respected companies. This means that the company is suitable for almost every investor and is included in many stock portfolios. Alphabet has also recently started paying a small quarterly dividend. So you should ask yourself the following questions:

• Does a growth company fit your needs?
• Can you continue to analyze the business as it progresses?
• Given its volatility, can you hold the stock if the price drops or even buy more?

If you are buying only a small portion of Alphabet to gain exposure or to generate some vested interest, these considerations may not be as important as if you were purchasing a full position.

3. How much can you afford to invest?

How much you can invest depends less on Alphabet than on your personal financial situation. Stocks can be volatile. To give your investment time to pay off, you’ll probably want to be able to leave the money in the stock for at least three to five years. That means you can live without the money for at least that period of time.

It’s important to commit to holding the stock for three to five years. You’d hate to have to sell the stock when it’s nearing a low point, only to watch it rise much higher after you sell the position. By sticking to a long-term plan, you’ll be able to ride out the stock’s ups and downs.

When investing in individual stocks, you should keep the percentage of each individual position between three and five percent. This way, you are not highly exposed to the risk of a single investment dragging down your portfolio’s return. If the stock has a higher business risk, you can choose an even lower percentage than this range.

Additionally, rather than investing a one-time amount of money in the stock, consider how you can add more money to your position over time.

4. Open a brokerage account

Although opening a brokerage account may seem difficult, it is actually quite simple and you can have everything set up in about 15 minutes.

Here is Bankrate’s list of the best brokers for beginners.

After you open your account, you’ll want to fund it with enough money to buy Alphabet stock, but you can easily do this step online.

5. Buy Alphabet shares

Once you’ve decided to buy Alphabet stock and have your brokerage account open and funded, you can place your order. Use the company’s ticker symbol when placing your order. In Alphabet’s case, you have two options, as there are multiple public classes of stock – GOOG and GOOGL – with the latter having voting rights. (This structure in itself is a hidden risk for many tech companies, especially new IPOs.)

Most brokers have a “trade ticket” at the bottom of every page where you can enter your order. On the broker’s order form, you enter the symbol and the number of shares you can afford. Then you enter the order type: market or limit order. A market order buys the stock at the current price, while a limit order only executes when the stock reaches the price you specify.

If you’re just buying a few shares — and Alphabet is about $160 a share — then stick with a market order. Even if you pay a little more for a market order now, it won’t significantly affect long-term performance if the stock continues to do well.

Conclusion

Buying a stock can be exciting, but success doesn’t come overnight. Still, investing in stocks is one of the best ways to earn passive income over time, and investors should plan their investments for the long term. In addition, they should consider dollar-cost averaging if they believe in the stock for the long term.

With dollar cost averaging, investors add a fixed amount of money to their position over time, which is very helpful when stock prices are falling and allows them to buy more shares. High-profile stocks can fall from time to time, so this strategy can help you get a lower purchase price and higher overall profits.

Frequently asked questions about Alphabet

• How profitable is Alphabet?

  Over the last 12 months, the company reported a profit of $87.66 billion on revenue of $328.28 billion.

• How does Alphabet make most of its money?

  Alphabet makes virtually all of its money from its well-known subsidiary Google, which includes Google Search, YouTube ads, Google Network and Google Cloud.

• Who are Alphabet’s main competitors?

  The company’s biggest competitors include other major technology giants such as Apple, Microsoft, Amazon and Meta Platforms.

• What is the biggest risk for Alphabet?

  A US judge recently ruled that Google violated antitrust laws to become the world’s leading search engine. According to the ruling, Google has a nearly 90 percent market share in search services. Justice Department officials could eventually force the company to sell its Android, Chrome or AdWords segments to restore competition.

• How many Alphabet shares are there?

  Alphabet has three classes of shares: Class A shares with voting rights comprise approximately 5.86 billion shares, Class B shares, with ten times the voting rights of Class A and held only by the founders, comprise 885 million shares, and Class C shares without voting rights comprise 6.59 billion shares (as of July 16, 2024).

— Bank rates Logan Moore has contributed to an update of this story.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. Investors are also advised that past performance of investment products is no guarantee of future performance.