With more than four million hosts and 800 million guest arrivals on its platform, Airbnb has grown from a niche brand to a widely used verb. And now, following the Airbnb IPO, you can buy into this company’s future growth.
If you’re betting on the travel and leisure resurgence as Covid-19 restrictions are lifted, here’s everything you need to know to buy Airbnb stock.
How to Buy Airbnb (ABNB) Stock
1. Open a Brokerage Account
To buy ABNB, you’ll need to open an investment account if you don’t already have one. You’ll want to focus on those with no trading fees and low investment minimums. If you aren’t sure where to get started, check out Forbes Advisor’s list of the best investment apps and best brokerages.
Most brokers and investment apps allow you to choose an account type that corresponds with your goals. You can choose all the usual suspects in terms of registered accounts with tax-free or tax-deferred benefits or you can pick a regular taxable investment account.
For example, if you put your Airbnb stock in a tax-free 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 up to $81,500 if you were born in 1991 or earlier and you’ll have a smaller contribution limit according to your birth year if you were born after 1991. You won’t even have to pay tax on your TFSA proceeds once you take out the money.
If you’re saving for retirement, a Registered Retirement Savings Plan (RRSP) is where your investment should go. This is a tax-deferred savings account that allows your investment to grow tax-free until the last day of the year you turn 71. At that point, you must withdraw the proceeds and that’s when they count as income on your income tax.
One more specific benefit of RRSPs for US stockholders is that if that stock pays a dividend, you will have to pay a 30% withholding tax to the IRS (15% if you file a W8-BEN form with your brokerage), but if the stock’s in an RRSP, you won’t have to pay any tax at all because the IRS recognizes the RRSPs tax-deferred nature. Unfortunately, they don’t recognize other registered accounts, so you’ll still have to pay the withholding tax on dividends if your stock is in a TFSA or one of the other accounts available with an “R” at the beginning of its acronym.
On the other hand, a taxable brokerage account lacks the tax benefits of RRSPs, but they may provide more flexibility. That’s because you can deposit as much money in them as you wish, and withdraw your profits whenever you want. If you lose money on investments, you can even deduct some of your losses from your taxes, via tax-loss harvesting.
2. Think About How Much You Want to Invest in ABNB
To figure 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—as well as put at least something toward retirement and an emergency fund? If so, whatever is left over can go toward investments, like Airbnb.
- What’s ABNB’s current price? Stock prices are in constant states of flux, but you can look at their recent price trends to get a sense of how much shares might cost you. For the past year, shares of Airbnb have topped over $130.54 ($100 USD) a share. This means unless your brokerage offers fractional share trading, it may be pricey to load up on Airbnb stock. Plus, only two discount brokers in Canada offer the opportunity to buy fractional shares — WealthSimple and Interactive Brokers.
- What’s your investing strategy? Most investors follow one of two strategies: buying a lot all at once or slowly accruing small amounts of shares over time. This latter method, called dollar-cost averaging, allows you to invest in tiny increments regularly and may help you pay less per share over time. It also decreases the risk that you accidentally buy a lot when prices are high or too little when prices are low.
- What about other investments? Airbnb likely won’t be your only stock holding, so you’ll want to think through how it jives with the other investments you own. “Airbnb is a growth stock and isn’t consistently profitable yet,” says Matt Frankel, a certified financial planner (CFP) and senior analyst for The Motley Fool. “Therefore, Airbnb is most appropriate as part of a well-rounded stock portfolio for risk-tolerant investors who have years to let the investment thesis play out.”
3. Do Your Due Diligence
Before buying shares of Airbnb—or any stock—do some homework. You want to review the company’s financial records, future plans and corporate structure to make sure you’re comfortable with its strategy and confident in its potential.
Publicly traded companies like Airbnb are required to file their financial statements with the US Securities and Exchange Commission (SEC) on a quarterly and annual basis. You can review Airbnb’s annual reports and quarterly filings on its investor relations page or by using the US SEC’s database. You can complement these with expert analyzes available through your brokerage or on third-party providers like Globe Investor.
4. Place an Order
You can buy shares by logging into your brokerage account or investment app. Then simply enter Airbnb’s ticker symbol (ABNB) and the number of shares you want to buy or the dollar amount you want to invest.
You may have to choose which kind of order you want to place. By default, you will probably enter into what’s called a market order, meaning you are purchasing shares at Airbnb’s current price.
You may also have the option of inputting a limit order, which restricts your purchase to a certain price threshold. If ABNB goes over that amount, you won’t purchase any shares. Limit orders can be particularly helpful if you only want to buy shares at a certain price point or if you are concerned about the stock experiencing wild price swings, with your order going through when the price is too high.
Because Airbnb is traded on the Nasdaq, your trades will be fulfilled during its normal business hours (9:30 am until 4:00 pm ET, Monday through Friday), unless you have access to pre-market or after-market extended hours through your brokerage.
5. Be Aware Of Currency Conversion Fees
When you trade an American stock from Canada, your brokerage will charge you currency conversion fees both when you buy and again when you sell your shares. These fees range from 1% to 4% depending on the brokerage and they are on top of the currency exchange rate.
You can bypass these fees by keeping the money you use to by US stocks in US dollars within a US dollar bank account at a Canadian bank. This way you never have to convert currency at all. You can also use Norbert’s Gambit.
Norbert’s 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, then you ask your brokerage to “journal over” your Canadian shares into the American listing and make them into American shares of the same stock. You then sell your American shares and can use the US dollars that result to purchase any American stock or ETF you want (including ABNB) without converting currency.
6. Monitor Your Account
When investing in individual stocks, like Airbnb, it’s best not to set things and forget them. Instead, you’ll want to check in on your investment’s progress from time to time.
You may wish to track how its price changes over time in comparison to major benchmarks, like the Nasdaq 100 or S&P 500, as well as stocks in similar industries. You should also keep up with how its financial situation changes or evolves over time by following its public filings and industry reports, just as you did before you bought into 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 want to sell.
If you’re selling shares at a profit, you’ll have to consider capital gains taxes. If you stand to make significant profits (or large losses), you may want to speak with a tax professional to determine the best ways to manage your income.
Thankfully, Canadian investors in US stocks only pay capital gains to the CRA on their income tax, (50% of the gained value) unless they have a stake in a US corporation that’s 5% or more and that corporation counts its primary assets in US real estate. In that case, they will also owe capital gains to the IRS.
You will also owe estate tax to the IRS when you die if you make $5 million USD or more from your US investments.
Other Ways to Invest in Airbnb
If you love to travel or have made money hosting on Airbnb, investing in the company may seem like a no-brainer. But keep in mind that investing in individual stocks can be incredibly risky and expensive, even for experienced traders.
That’s why financial experts recommend you devote most of your investment portfolio to index funds and exchange-traded funds (ETFs) that hold hundreds, if not thousands, of stocks. This substantially decreases the risk of your investments experience wild price swings that may lose you money.
Luckily, it’s easy to find Airbnb in funds: approximately 114 ETFs hold Airbnb shares, according to ETF.com, and with its recent inclusion in the Nasdaq 100, you’ll be able to gain exposure in any Nasdaq 100 fund.