- Ready to buy shares of Airbnb?
- Learn what to look for in an online broker and assess how much to invest.
- Master different order types and trading strategies to maximize your returns.
Founded in August 2008, with headquarters in San Francisco, CA, Airbnb (NASDAQ: ABNB) disrupted the accommodation industry, turning homeowners into guest house managers by facilitating short-term rentals of their homes.
Buying Airbnb stock is easy, thanks to the rise of commission-free brokers. Scroll down for a complete guide to everything you need to know about buying Airbnb stock.
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Airbnb was one of the most anticipated IPOs of 2020. Launching on the NASDAQ exchange on 10th December 2020, Airbnb was supposed to IPO earlier in the year. However, the coronavirus pandemic delayed the company from going public. The NASDAQ exchange listed the company at a reference price of $139.25 on its debut.
Where to buy Airbnb stock
Still looking for a stock broker? Try our stock broker comparison and compare fees, tradable assets, and more.
Step 1: Pick a broker
Choosing your broker is the most important part of opening your trading account. In 2019, Charles Schwab followed the model set by Robinhood, offering commission-free trades on stocks and ETFs.
It wasn’t long until the rest of the industry followed suit. Now you have commission-free trading accounts available with many large brokerages, including TD Ameritrade and Interactive Brokers.
When you’re choosing your broker, look for the following features in the company’s offering:
Commissions can kill your profitability. If you’re a day trader chasing momentum stocks like Airbnb, you could enter and exit the stock several times in a single trading session.
Each time you buy and sell, that equates to one “round-trip,” and the broker charges you a commission based on the number of shares you buy and sell in the trade.
If you’re only trading small price changes, say 10-cent to 15-cent movements on the stock, your commissions will eat up a significant chunk of your profits.
Low account fees
Look for brokers offering low account fees. Broker fees vary from company to company. Some brokers charge inactivity fees and transaction fees, and all of these costs end up eating into your profits. Do your due diligence on any broker before you commit to funding your account.
Brokers realize that most newcomers to trading start with small accounts. Therefore, purchasing a single share of Airbnb isn’t possible for some players in the market. To resolve the issue, some brokers offer the chance to buy fractions of shares.
For instance, if you only have $300 in your trading account, you can only buy one share of Airbnb. However, purchasing that single share risks over 50% of your account balance.
Trading fractional shares allow you to purchase a 1/10th of a share at a tenth of the price. As a result, your account risk drops to 5%, a reasonable risk management position.
User-friendly trading platform
As a newcomer to trading, you’re going to have to learn how to use a trading platform.
Some brokers allow you to use trading platforms like Sterling and DAS Trader, while others use proprietary trading platforms designed by the broker.
Typically, options like DAS and Sterling have more features than broker-managed trading platforms. If you’re a newcomer to trading, a broker-managed platform may be easier to master.
Fast funding and withdrawals
Your broker should offer you fast funding of your account and speedy withdrawals. The first time you deposit or withdraw might take from 5 to 10 days for the funds to reflect in your account.
However, after your first deposit or withdrawal, your funds could start reflecting in your account within 24 to 48 hours.
Real-time market data and charts
Your broker will offer you charts included with your trading platform. However, the data on the charts will experience a delay, updating every 15 minutes or so. While it’s a suitable choice for swing trading which occurs over a few days to weeks, it’s the wrong option for day trading.
Access to charts with real-time data will help you make instant decisions based on current price movements in the market. Most brokers will charge you for real-time data. If you’re using a charting package like TradingView or eSignal, you may have to pay an additional fee for real-time market data.
Your broker could offer you margin trading to help you grow a small account fast. Margin allows you to “borrow” stock from the broker to increase the value of your trade above the cash balance of your account.
For example, you purchase a share of a stock valued at $100. With margin, the broker will let you purchase three to six times the limit of your cash balance. Therefore, with a 6:1 margin ratio, you can buy up to $600 worth of stock, with just $100 in your account.
It’s important that you have back-up liquidity before trading on margin. If the price of the stock goes down, you may be subject to margin calls, which means you will have to put additional cash into your account or the broker will sell your position at the market price, locking in a loss and potentially limiting your ability to trade on margin in the future.
Step 2: Fund your account
After settling on the right broker, it’s time to fund your account. Since the PDT (Pattern Day Trader) rule applies to US-based brokers, you’ll need to fund your account with $25,000 if you want a margin account.
Some brokers will offer cash trading accounts (not margin accounts) with $10,000. However, if you’re funding your account with less than this amount, you’re going to need to use an offshore broker that doesn’t have to comply with the PDT rule.
Most offshore brokers have minimum deposit amounts of $300. As a reminder, it may take up to 5 days for the funds to reflect in your brokerage account the first time you make a deposit.
Step 3: Decide how much you want to invest
When funding your account, you’ll need to decide on the amount of capital you want to allocate to the broker. You don’t need to dump thousands of dollars into your account with fractional share trading.
Step 4: Choose between shares of stock or ETF
Exchange-Traded Funds (ETFs) offer you an alternative to purchasing shares. An ETF comprises a basket of companies, with the ETF giving you exposure to the price action on all stocks through a single financial vehicle―the ETF.
With ETFs, you diversify your portfolio into several companies, all with a single asset. Typically, ETFs are the better choice for long-term investment strategies. Since the ETF consists of several companies, there’s less volatility in the price action, making it easier to manage the trade.
ETFs such as Vanguard Growth ETF (VUG) and Schwab U.S. Mid-cap ETF (SCHM) both own thousands of shares of ABNB as well as other companies, helping you diversify your risk so your investments are not too concentrated in any one company.
For this reason, many pension funds, 401(k)s, and mutual funds like investing in ETFs. It’s a way to spread the risk and ensure one single trade doesn’t blow up your account.
Step 5: Set up your order
After setting up your account, it’s time to place your first trade. There are several different types of orders you can route through your trading platform. Let’s unpack each of them in detail.
This order gets you into the trade at the nearest possible price. However, it’s a bad choice for traders. For instance, you might want to enter a trade at $1. However, by placing a market order, it fills at the next available price. Therefore, you could end up filling your order above the $1 price, at $1.05, for example. In this case, the extra 5-cents would be your “slippage.”
When you place a limit order, you’ll only fill at that price. For instance, if you set a limit order to $1, the broker will only fill your order at $1. Therefore, if the market surges, you might not fill at the $1 price and miss the trade. However, it’s the best order type for managing risk and the preferred order type for professional day traders.
This order type will only sell your shares if the market hits the exact order price. For example, if you want to sell at $1, but the price only gets to $0.99, the order will not execute.
This order type is a risk management tool to take you out of the trade so you can minimize your loss. When the price reaches your stop loss, the broker sells your stock. You can walk away from your trading station and let the platform do the work for you.
Step 6: Place the order
After selecting your stock/ETF and your order type, it’s time to place your first trade. You’ll see the trading platform has a buy and sell button on the interface. Complete the fields for the number of shares you want to buy and your order type, and then click the buy button.
Step 7: Monitor performance
Traders thrive on volatility. Volatility refers to the movement in the price of the stock. Newsletters, press releases, earnings reports, and other financial news relating to the company’s performance will drive volatility in the stock price.
Understanding how these events shape the market is critical. Before you enter any trade, you should have an exit in mind. Stick to your strategy, be consistent with execution, and you’ll see results.