How To Buy Paypal Stock (PYPL)

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PayPal Holdings Inc. (PYPL) is one of the biggest and most popular online payment platforms in the world. Founded in 1998, PYPL has grown to become a Fortune 500 company with 426 million active accounts.

PayPal has expanded its business in the U.S. market to include cryptocurrency trading and buy now, pay later (BNPL) services. As of right now, these services aren’t available in Canada, but if you feel like the company is strongly positioned for more growth (perhaps into international markets with these new services), here’s how to buy PayPal stock.

How to Buy PayPal Stock

1. Open an Investment Account

Before you can buy or sell shares of PayPal, you need to choose a broker and open an investment account.

Brokers act as intermediaries between you and the stock market, executing your trades. They range from low-fee online brokers that allow you to buy and sell stock on your own, to full-service brokers that are more expensive but provide professional investment management services.

Costs can vary by broker, so look for one that offers low fees and has a low account minimum so you can start investing right away.

Consider the type of brokerage account you’ll need:

  • Registered Retirement Savings Plan: RRSPs allow you to save for retirement. All RRSP contributions are tax-deferred as long as they remain in the account and even when they are taxed on withdrawal, (since you will be retired by then) you will likely be in a lower tax bracket and pay less income tax than you would now.
  • Taxable investment accounts: Taxable brokerage accounts lack the tax benefits of a registered account like an RRSP, TFSA or RESP, but they offer more flexibility. There are no annual contribution limits, and you can withdraw money at any time without paying penalties.

Check out the best investment apps and online brokers to get started.

2. Decide How Much Money to Invest in PayPal

Once you’ve chosen a broker and opened an account, you should get a handle on how much money you want to invest in PayPal stock. When deciding on an investment budget, take into account these four factors:

  • Your Overall Budget. How much of your budget is available to invest? The money you invest in stocks like PayPal should be separate from the cash you stash in savings for an emergency fund or shorter-term goals.
  • Current Stock Price. As of late July 2022, PayPal’s stock price is over $103 ($81 USD), so you’ll need to deposit at least that much in your new brokerage account. Only two brokers in Canada allow you to buy fractional shares — Interactive Brokers and Wealthsimple — which let you buy only a small portion of one share of PYPL.
  • Your Overall Portfolio. How will PayPal fit into your overall investment portfolio? Experts recommend against investing only in one company or even one industry; instead, they recommend diversifying your portfolio by investing in many companies and industries. In fact, investing researchers found that investors need 30 to 100 stocks to have an appropriately diversified portfolio.
  • Your Investing Strategy. Broadly speaking, you can buy PYPL using dollar cost averaging or a lump sum approach. The latter makes sense if you receive a sudden windfall or expect a stock’s price to increase in the short-term. Dollar cost averaging makes sense for investors that have more limited funds to invest at one time and want to reduce their risk over time.

3. Do Your Due Diligence on PayPal

Buying an individual stock like Paypal is a serious investment, and it’s not something you should rush into without doing research. Before placing orders for PayPal shares, review the company’s financial statements, annual reports and investor presentations. You can view those documents on its investor relations website.

By reading those documents, you can learn about the company’s business model, the threats facing it and its future outlook.

For example, PayPal has expanded beyond an easy way to pay for purchases from online retailers in the American market. If you live in the U.S., PayPal has a range of payment solutions, including peer-to-peer payments through Venmo and payment processing through Braintree. And, PayPal even allows U.S. customers to buy and sell cryptocurrency, which may pay dividends for the future of the stock, depending on crypto’s own versatility as a payment mechanism in the future.

4. Place An Order for PYPL Stock

After you understand the fundamentals of PayPal’s business, you’re ready to place an order. Log on to your broker’s trading platform and type in PayPal’s ticker symbol—PYPL—and add the number of shares you want to purchase. For brokers that offer fractional shares, enter the dollar amount you want to invest.

Brokers usually allow you to select an order type. While there are many variations, the two most common are market and limit orders.

  • Market Order. When you place a market order, the order is processed immediately at the current price.
  • Limit Order. With a limit order, the order is only processed once the stock reaches a specific price or better.

5. Be Aware of Currency Conversion Fees and Taxes

If you buy a U.S. stock like PYPL from Canada your brokerage will charge you between 1% to 4% in currency conversion fees when you buy American stock and then again when you sell those shares and convert the value back to Canadian dollars. This is on top of the exchange rate at the time.

Thankfully, you can avoid these conversion fees a number of ways. You can open a U.S. dollar bank account or a U.S. dollar brokerage account and keep American dollars in there reserved exclusively for the purchase of U.S. Stock. You can also avoid conversion fees by performing Norbert’s Gambit.

This so-called gambit is when you buy a stock or ETF that’s interlisted on American and Canadian stock exchanges. You buy Canadian shares of that stock or ETF, then you ask your brokerage to “journal over” your Canadian shares and turn them into American shares of the same stock, you then sell your American shares in U.S. currency and can use the U.S. dollars that result to purchase any American stock or ETF you want, like Amazon, without converting.

As for taxes, you will be subject to a 15% withholding tax if your U.S. investment produces a dividend. You won’t be taxed by the IRS at all if your investment vehicle is inside an RRSP because this particular registered account is recognized by the IRS, which isn’t the case for every registered account in Canada. For example, an RESP doesn’t have the same privilege and you will be taxed if a dividend producing investment is inside that type of account.

6. Evaluate Your Investment

Whether you invest in just one stock like PayPal or hundreds of stocks, it’s wise to periodically check in on your investments and see how they measure up to the overall stock market.

Useful when evaluating your investment’s performance are stock market indices. A stock market index measures the performance of a particular segment of stocks, such as technology companies based in the U.S. or the largest companies listed on the stock exchange.

PayPal is traded on the Nasdaq stock exchange. To get an idea of how well PayPal is performing, you could compare it to the performance of the Nasdaq Composite Index, an index that includes more than 3,000 stocks traded on the Nasdaq exchange.

For example, the Nasdaq Composite Index grew by 53.54% over the past three years. During that same time period, PayPal’s stock price decreased 24.29%.

How to Sell PayPal Stock

If you decide to sell your shares, think about setting up a meeting with a tax professional first. If your investment has grown in value, you may incur capital gains taxes when you sell your shares, so a tax professional can help you come up with a plan on how to handle your investments and taxes.

To sell your shares, enter PayPal’s ticker symbol and the amount you want to sell in your broker’s trading platform. As with buying stocks, you can typically select a market order to sell shares right away, or you can designate a specific price.

As a Canadian investor, you will likely only owe capital gains tax if you’ve made a profit to the CRA (50% of the growth value) and not the IRS. The IRS only expects capital gains from you if you have a stake of 5% or more in an American corporation and that corporation’s primary asset is U.S.-based real estate.

In addition, if you happen to earn $5 million USD from your U.S. investments, your estate will owe estate tax when you die.

Invest in PayPal Through Index Funds and ETFs

You know how to buy PayPal stock now, but is buying individual stocks best for you? If it seems too risky, consider investing in index funds or exchange-traded funds (ETFs) instead.

Index funds and ETFs are made up of hundreds or even thousands of stocks, so you can buy a single share of a fund and get instant diversification. By contrast, you’d have to buy many  stocks — and manually monitor and rebalance your portfolio — if you invested in individual stocks on your own.

Hundreds of funds include PayPal as one of their holdings. One of the best known is the Invesco QQQ ETF, a fund that tracks the Nasdaq-100 index. PayPal makes up 0.81% of its allocation and other top holdings include Apple, Microsoft and Amazon.