Start Investing: Buy This Megacap Tech Stock for Just Over $500

July 22, 2021

If you’re young and just starting out investing, it can seem like an intimidating landscape. There are so many stocks out there to buy.

It can seem like an easy choice to spend that US$500-600 on the newest lit Gucci logo-printed t-shirt.

But instead of that, why not invest in your future financial health by buying shares in one of the world’s biggest companies?

That’s because any investor, no matter how young, can start their investment journey with just a small amount of money. You may ask, “How”?

Today, it’s increasingly simple. You can start by owning a piece of a business that we are all familiar with, particularly if you’re a Gen Zer and tech-savvy.

It’s no surprise that the biggest companies in the world today are technology firms. So, for young investors just starting out (or anyone, really), here’s one megacap tech stock you can buy shares of for just over US$500.

One of the leaders

You would have to be living under a rock if you haven’t heard of Microsoft Corporation (NASDAQ: MSFT), the second-largest company in the world (by market value) behind only iPhone giant Apple Inc (NASDAQ: AAPL).

Shares of Microsoft cost around US$280 apiece so you could buy two shares of the stock for around US$560.

Remember, that when investing, it’s important to focus on the dollar amount you invest and don’t get too hung up on the number of shares you are purchasing as that’s not actually all that relevant.

Cloud, gaming and office giant

In terms of its business, Microsoft is perhaps best known for its Microsoft365 offering that includes cloud-based productivity tools that include Microsoft Word, Excel and PowerPoint.

Microsoft also owns career networking platform LinkedIn. However, younger investors may be more familiar with its online gaming offering through its well-known Xbox.

The most recent iteration of the gaming console is the Xbox Series X and S, which offer a smooth gaming experience through faster frame rates.

Longer term, one of the company’s biggest, and fastest-growing, divisions is cloud computing – where it owns the Azure service.

Strong business numbers

When we buy a stock, it’s important to ensure that the company’s business is doing well; much like we would scrutinise performance of our own business if we were overseeing it.

In that sense, though, Microsoft is absolutely crushing it. In its latest quarter, for fiscal Q3 FY 2021, revenue rose 19% year-on-year to a whopping US$41.7 billion.

Net profit turned out to be a robust US$15.5 billion. The company’s three main operating segments; Intelligent Cloud, Productivity and Business Processes, and More Personal Computing all contributed fairly equally to revenue.

Netflix for gaming

Microsoft’s new gaming offering is something that’s got all millennials and Gen Zers excited. That’s because it was launched earlier this year to much fanfare but on an “invite-only” basis first.

The new Xbox Cloud Gaming service aims to position itself as the “Netflix for gaming” in that individuals will subscribe to Microsoft’s Game Pass for US$14.99 per month and will be able to access more than 100 top gaming titles.

Utilising Microsoft’s Azure cloud platform, gamers will be able to stream games without having to download them – a relatively new concept in the serious gaming world.

The company says it will roll out the Game Pass service in 22 countries while continuing to invite new users to try it.

Being able to launch the service on smartphones and tablets, such as through Android phones, iPhones and iPads, will enable Microsoft to reach a much wider audience than if it just distributed games via the Xbox.

Start small and build

For younger investors, buying a few shares of Microsoft even five years ago would have paid out handsomely. Over the past five years, Microsoft shares have delivered a price return of 397% to investors.

Currently, the tech giant continues to deliver through its business performance and that is reflected in its share price appreciation. Even over the past 12 months, Microsoft’s share price is up nearly 33%.

What does that teach us? That buying the leaders and winners of certain industries can potentially be rewarding over the longer term.

So, starting out with even US$500-600 to invest shouldn’t stop us from identifying solid investments and putting that money to work.

Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Microsoft Corporation.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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