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Investing in Google Stock
Google has been a hot stock for the last few years, and if you’re thinking about getting started investing, you may be considering investing in Google stock. I mean, why not? If you could double or triple your investment, who wouldn’t?
Well, you should carefully consider your investment in Google stock, or any stock, based on these following things.
How Does Google Earn Revenue?
When considering investing in any company, including Google, you should look at how they make their money, and how they plan to continue to do so in the future.
For Google, they make their money mostly through advertising and minimally through other services. And going forward, they don’t plan to change this strategy too much. They make their money displaying advertisements in search results, and are going to continue to do that.
They are also trying to expand into other advertising arenas, such as mobile, but plain old search makes up the most of the earnings.
What is The Company’s Advantage?
You should also look at what advantage a company has over its competition when investing. You don’t want to invest in a company that is struggling to keep up with its competition.
In Google’s case, it is dominating its competition in search, and that is the main competitive advantage is has. Advertisers want to use Google because more consumers use Google search than any other company. Will that change in the future? Maybe, but unlikely.
The company also has an advantage in hiring talent to keep it competitive going forward. Knowledge and talent, especially in technology companies, are key to future success. The companies that can continue to invent are the ones that survive.
What is The Stock Price?
Finally, when investing, you want to look at a company’s price, especially compared to its earnings. This tells you how expensive a company is to invest in, because you will pay a multiple of the amount it earns.
In Google’s case, it is currently priced at about 18x earnings. This means that you will pay $18 for every dollar the company earns. The goal is that earnings continue to grow, and so you won’t really have to wait so long to be recouped.
Google is expensive, but not compared to other technology companies. As such, it could be a good investment going forward.
If you really want to invest in Google stock, please study the Google Investors Relations information.
However, personally I do not think that I have more knowledge about Google than the rest of the market to make a decision if I should buy this particular stock. Note that I do invest in Google. Google is one of the S&P 500 stocks. By investing in an S&P 500 index fund, I also invest in Google stock… together with hundreds of others stocks. In this way I have diversified my investment.
Do you know more than the market about Google or another stock, or do you also invest in Index Funds? Please comment below. Get in any case our free stock investing email newsletter to learn more about index investing.
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