- Despite the pandemic, Xero has managed to increase revenues and profits.
- It continues on a growth trend, but you need to keep an eye on the competition as well.
- Xero is not a dividend stock.
Xero (ASX: XRO) is a New Zealand–based public technology company that is listed on the Australian Securities Exchange. It was founded in 2006 and is headquartered in Wellington.
If you want to buy shares in this cloud accounting SaaS company, here’s how.
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Xero Limited and its subsidiaries together operate as a software as a service (SaaS) company worldwide. Xero cloud-based accounting software connects small businesses and their advisors. There is also a Xero mobile app and accountant and bookkeeper tools, such as Xero HQ, Xero Cashbook, Xero Ledger as well as Xero Practice Manager, Xero Workpapers and Xero tax tools.
The company's services are used by everyone from Amazon sellers, creatives and cafes to startups and small businesses. Xero serves clients in construction, e-commerce, farming, healthcare, hospitality, information technology, legal, manufacturing, non-profit, real estate, retail and tourism sectors. Subsidiaries of Xero include Hubdoc Inc., Max Solutions Limited, and Planday A/S.
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Step 1: Choose a broker
You can buy shares online through a broker. Online brokers offer a variety of options. In order to buy shares in Xero, your broker should have access to the Australian stock exchange.
Consider these factors when choosing an online broker.
Access to trade the ASX
Not every online brokerage or investment app has access to trade the ASX. Check before registering.
It's possible to find very competitive brokerage rates if you shop around. To buy shares in ASX listed companies like Xero, there is typically a brokerage fee per trade.
Easy-to-use trading platform
Look for a platform that’s simple to use. If you’re new to trading, look for features such as basic educational resources, easy customer service, and the ability to practice in a demo account before starting to trade with real money.
Research and analysis
Company announcements and news, historical share price data, recommendations, and analysts' price forecasts help you make a more informed decision on buying Xero shares.
Step 2: Funding your account
To begin trading, you will need funds in your account. The minimum deposit required varies between brokers. Funds can be paid in from your bank account, credit card, PayPal, etc. Note that it may take several days for funds to clear.
Step 3: Decide how much you want to invest
A very important step in investing is to determine how much risk you are willing to take. You should set a budget for buying shares and only invest what you can afford to lose, as share prices are volatile.
Step 4: Choose between buying shares or an ETF
ETFs (Exchange Traded Funds), which are a collection of shares, bonds, and cash, can be traded on stock exchanges such as the Australian Securities Exchange (ASX). ETF issuers manage where funds are invested, meaning they may offer a simple way for beginners to build diversified investment portfolios.
Investing in an ETF allows you to invest in a market sector or in a specific commodity, as opposed to an individual company like Xero. Because the product tracks a whole market, there's less chance it will experience sudden falls or rises, but you'll also have a harder time making the big gains that occasionally come with shares.
ETFs with exposure to Xero include iShares Core MSCI EAFE ETF (IEFA), Vanguard FTSE All-World ex-US Index Fund (VEU), and Global X Cloud Computing ETF (CLOU).
Step 5: Decide your order type
Here are some of the main order types you can use to configure your purchase of Xero shares.
These are orders to buy shares at the current market price. These prices can change while you're trading in fast-moving markets. Let's say you place an order to buy Xero shares at $154. You place an order, but by the time it executes the share price has dropped to $153. You will get your shares at the lower price. The same situation applies if the share price goes up while your order is being executed.
With a buy limit order, your trade will only execute when the share price reaches the price, or lower, that you nominate. Let’s say you decide you only want to buy Xero shares at $155 or lower. Once the price drops to $155, your limit order will kick in.
A stop-limit order is an order to buy or sell a stock, combining the features of a stop order and a limit order.
Suppose Xero is trading at $155 and an investor wants to buy shares once it starts showing some serious growth. The investor has entered a stop-limit order for $160 as the stop price and $165 as the limit price.
If the price of Xero exceeds $160, the order becomes a limit order. As long as the order can be filled under $165 (the limit price), the trade will be filled. If the price exceeds $165, the order will not be filled.
With a stop loss order, you nominate a price at which you decide to sell your shares. If the share price goes into free-fall, for example, the stop loss means you sell out before your shareholding suffers too much damage.
Step 6: Place your order
Once you've made all your choices, it's time to place your order. Open up your trading platform, type in the Xero share code (ASX: XRO) and execute the order with the features you've chosen. This is usually as easy as clicking a button.
Step 7: Monitor your investment
Whether you buy shares as a long term investment, relying on dividends or to benefit from price fluctuations, it is necessary to keep track of both share price movements and the company’s performance.
Track Xero’s performance
Keep track of Xero’s business performance and financial fundamentals in addition to watching its share price movements.
Xero has weathered the pandemic with a slower revenue growth rate but with higher profits compared to previous years. Its subscriber numbers have also been growing.
As a provider of online accounting software for small businesses, Xero faces severe competition from many international firms.
Top Xero competitors include QuickBooks Online, Sage Business Cloud Accounting, Zoho Books, OneUp, FreshBooks, QuickBooks Desktop, Sage 50 Cloud Accounting, AccountEdge Pro, Kashoo and Wave Accounting.
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