With more than four million hosts and 800 million guest arrivals on its platform, Airbnb has gone from a niche brand to a household name. And now that Airbnb has gone public, you can invest in the future growth of this company.
If you’re banking on the resurgence of travel and leisure activities when Covid-19 restrictions are lifted, here’s everything you need to know to buy Airbnb shares.
How to buy shares in Airbnb (ABNB).
1. Open a brokerage account
To buy ABNB you need to open an investment account if you don’t already have one. You should focus on those that have no trading fees and low minimum investments. If you’re not sure where to start, check out Forbes Advisor’s list of the best investment apps and best brokers.
Most brokers and investment apps allow you to choose an account type that suits your goals. You can select all the usual suspects in terms of registered accounts with tax-exempt or tax-advantaged benefits, or a regular taxable investment account.
For example, if you put your Airbnb shares in a Tax-Exempt Savings Account (TFSA), you can build your investment tax-free up to an annual contribution limit ($6,000 in 2022), and if you’ve never opened a TFSA, you can contribute Contribute up to $81,500 if you were born in 1991 or earlier, and have a lower contribution limit based on your year of birth if you were born after 1991. You don’t even have to pay taxes on your TFSA earnings once you finalize the money.
If you’re saving for retirement, your investment should go into a Registered Retirement Savings Plan (RRSP). This is a tax-advantaged savings account that allows your investment to grow tax-free until the last day of the year when you turn 71. At that point, you must withdraw the proceeds, and then they count as income for your income tax purposes.
Another unique benefit of RRSPs for US shareholders is that if that stock pays a dividend, you have to pay a 30% withholding tax to the IRS (15% if you file a W8-BEN form with your broker) , but if the shares are in an RRSP, you don’t have to pay any taxes at all since the IRS recognizes the tax-deferred nature of the RRSP. Unfortunately, they don’t recognize other registered accounts, so you’ll still have to pay dividend withholding tax if your shares are in a TFSA or any of the other available accounts with an “R” at the beginning of the acronym.
On the other hand, a taxable brokerage account lacks the tax benefits of RRSPs, but they may offer more flexibility. That’s because you can deposit as much money as you want and withdraw your winnings whenever you want. If you lose money investing, you can even deduct some of your losses from your taxes by collecting tax losses.
2. Think about how much you want to invest in ABNB
To find out how much you can invest in Airbnb, you need to ask yourself four simple questions:
- What’s your budget? Do you have enough money each month to cover your expenses — and at least have something for retirement and an emergency fund? What’s left over can flow into investments like Airbnb.
- What is the current price of ABNB? Stock prices are always on the move, but you can look at recent price trends to get a feel for how much stocks could cost you. Over the past year, Airbnb shares have exceeded $130.54 ($100) per share. That means it can be expensive to top up Airbnb shares unless your broker offers fractional share trading. Also, only two discount brokers in Canada offer the ability to buy fractional shares – WealthSimple and Interactive Brokers.
- What is your investment strategy? Most investors follow one of two strategies: buy a lot at once, or slowly accumulate small amounts of stocks over time. This latter method, called the dollar cost average, allows you to invest in tiny increments on a regular basis and can help you pay less per share over time. It also reduces the risk of accidentally buying too much when prices are high, or too little when prices are low.
- What about other investments? Airbnb probably won’t be your only equity investment, so you should consider how it fits in with the other investments you own. “Airbnb is a growth stock and isn’t consistently profitable yet,” said Matt Frankel, a certified financial planner (CFP) and senior analyst at The Motley Fool. “As such, Airbnb is best suited as part of a well-rounded stock portfolio for risk-taking investors who have years to play out the investment thesis.”
3. Do your due diligence
Before you buy Airbnb stock — or any stock — do some homework. You want to review the company’s financial records, future plans, and corporate structure to ensure you are comfortable with its strategy and confident in its potential.
Public companies like Airbnb are required to file their financial statements with the SEC on a quarterly and annual basis. You can view Airbnb’s annual reports and quarterly filings on the Investor Relations page or use the US SEC’s database. You can supplement this with expert analysis available through your brokerage or through third party providers such as Globe Investor.
4. Place an order
You can buy shares by logging into your brokerage account or investment app. Then just enter the Airbnb ticker symbol (ABNB) and the number of shares you want to buy or the dollar amount you want to invest.
You may need to choose what type of order you would like to place. By default, you’re likely to enter what’s called a market order, meaning you’re buying shares at Airbnb’s current price.
You may also have the option to enter a limit order that restricts your purchase to a certain price threshold. If ABNB exceeds this amount, you will not buy shares. Limit orders can be especially helpful if you only want to buy stocks at a certain price, or if you’re concerned that the stock will experience wild price swings and your order will be filled if the price is too high.
Because Airbnb is traded on the Nasdaq, your trades are executed during normal business hours (9:30am to 4:00pm ET, Monday through Friday) unless you have access to extended pre-market or post-market hours your mediation.
5. Be aware of currency conversion fees
When you trade an American stock from Canada, your broker will charge you currency conversion fees both when you buy and when you sell your shares. These fees range from 1% to 4% depending on the broker and are on top of the exchange rate.
You can avoid these fees by keeping the money you use to buy US stocks in US dollars in a US dollar bank account with a Canadian bank. This way you don’t have to convert any currency at all. You can also use Norbert’s Gambit.
Norbert’s Gambit is when you buy a stock or ETF that is listed on American and Canadian exchanges. You buy Canadian shares of that stock and then ask your broker to take your Canadian shares on the American listing and convert them into American shares of the same stock. You then sell your US stocks and you can use the resulting US dollar to buy any US stock or ETF (including ABNB) without converting the currency.
6. Monitor your account
When investing in single stocks like Airbnb, it’s best not to set things aside and forget about them. Instead, you should check the progress of your investment from time to time.
You may want to track how the price changes over time compared to key benchmarks like the Nasdaq 100 or S&P 500, as well as stocks in similar industries. You should also keep abreast of how its financial status is changing or evolving over time by following its public filings and industry reports, just as you did prior to your purchase from ABNB.
How to sell Airbnb shares
To sell your Airbnb shares, log into your investment account and enter the ticker symbol and the amount you wish to sell.
If you sell stocks for a profit, you have capital gains taxes to consider. If you want to make significant gains (or big losses), you should speak to a tax professional to find out how best to manage your income.
Fortunately, Canadian investors in US stocks only pay capital gains to the CRA on their income tax (50% of realized value) unless they have an interest in a US company that is 5% or more, and that company counts its primary Assets in USA real estate. In this case, they also owe the IRS capital gains.
You also owe the IRS estate taxes when you die if you make $5 million or more from your US investments.
Other ways to invest in Airbnb
If you love to travel or have made money hosting Airbnb, investing in the company seems like a no-brainer. However, remember that investing in individual stocks can be incredibly risky and expensive, even for experienced traders.
That’s why financial experts recommend devoting the majority of your investment portfolio to index funds and exchange-traded funds (ETFs), which hold hundreds, if not thousands, of stocks. This greatly reduces the risk of your investments experiencing wild price swings that could cause you to lose money.
Fortunately, finding Airbnb in funds is easy: According to ETF.com, about 114 ETFs hold Airbnb shares, and with its recent inclusion in the Nasdaq 100, you can get exposure to any Nasdaq 100 fund.