Is Investing in McDonald's a Good Idea?

view original post

An often-repeated investing rule is to buy what you know, meaning you should own stock in companies whose products and services you use or are otherwise familiar with. If you’re a fan of fast food, then you might be interested in how to buy McDonald’s stock. With billions of people served in thousands of locations around the world, the company is an established leader in the food service industry. Adding McDonald’s stock to your portfolio is a relatively simple process. Before adding any stock to your portfolio you may want to work with a financial advisor to get advice that is specific to your situation.

© Provided by SmartAsset how to buy mcdonalds stock

Is Investing in McDonald’s a Good Idea?

Whether buying stock in McDonald’s or any other fast-food company makes sense for you depends largely on your goals. It also helps to know a little about McDonald’s stock and what distinguishes it from competitors. There are some key things to consider when evaluating any stock:

  • How long the company has been in business
  • Annual earnings and revenue
  • Overall profitability
  • Short and long-term growth prospects
  • Company management
  • Total assets and liabilities
  • Overall positioning in its respective industry, relative to competitors
  • Market capitalization and valuation
  • How it typically reacts to volatility and its ability to weather downturns

McDonald’s is an established company and part of the Dividend Aristocrats club. Dividend Aristocrats are companies that consistently pay out higher dividends to investors year over year, for at least 25 consecutive years.

That might appeal to you if you’re interested in creating current income while applying a buy-and-hold strategy. McDonald’s isn’t a growth stock, per se, nor is it generally considered to be a value stock either. However, the company has solid financials and long-term plans for further growth which could yield even bigger dividends in the future.

How to Buy McDonald’s Stock in 3 Steps

© Provided by SmartAsset how to buy mcdonalds stock

If you’re interested in buying McDonald’s stock, digging into the company’s financials is the first step. Just as investing experts recommend buying what you know, it’s also important to know what you own. Once you determine that McDonald’s is a good fit for your investment strategy, the actual buying part is fairly simple. Here’s what you’ll need to do next.

Load Error

1. Decide How Much to Invest

Asset allocation refers to how you divide up assets in your portfolio. Diversification is an important part of that as it allows you to balance out the risk. When buying McDonald’s stock, consider how much of your total assets you’re comfortable investing. As a general rule of thumb, you may want to limit your total asset allocation to any one stock or security at 5%. Rebalancing regularly can ensure that you’re not overweight in any one asset.

Also, consider whether you want to make a one-time investment in McDonald’s stock or buy new shares periodically. For example, you might want to invest $1,000 in McDonald’s shares initially, then invest an additional $100 per month. That can determine where you open a brokerage account to make your investment.

2. Open a Brokerage Account

As mentioned, you’ll need a brokerage account to buy McDonald’s stock and other investments. A number of discount brokers now offer online stock trading with $0 commission fees. If you don’t have an account yet, it’s a good idea to shop around and compare the best brokerages online.

When comparing brokerage options, consider:

  • Range of investments offered (i.e., individual stocks, exchange-traded funds (ETFs), index funds, options, cryptocurrencies, etc.)
  • Minimum investment or trade requirements
  • Trading fees
  • Investment research and analysis tools offered

It’s also important to look at what kind of trading is offered. For example, some brokerages offer DIY or self-directed trading, where it’s up to you to decide which investments to buy or sell. Others offer both DIY trading and automated trading.

With automated trading, you tell the brokerage your goals and risk tolerance. The brokerage then uses an algorithm to build a portfolio for you automatically. All you have to do is deposit money each month. That’s how the majority of robo-advisors work.

If you’re interested in trading individual shares of McDonald’s stock, then you’d likely want the DIY option. However, if you’re leaning toward buying ETFs that include McDonald’s as an underlying holding you might prefer the simplicity of automated trading.

3. Buy McDonald’s Stock

Once your brokerage account is opened, you can make your first trade. The process for how to buy McDonald’s stock is likely to be similar at virtually any brokerage. You’d need to:

  • Navigate to the trading section of your account menu
  • Search for the McDonald’s ticker symbol (MCD)
  • Enter the number of shares you’d like to buy (or the amount you’d like to invest)
  • Choose your order type (market or limit)
  • Submit your trade request

Once your order executes, you’ll be an official owner of McDonald’s stock. If you’d like to continue purchasing additional shares, you can set up a recurring transfer from your bank account each month to cover those trades.

How to Sell McDonald’s Stock

If you own shares of McDonald’s stock that you’d like to sell, the process isn’t that different from buying. You’d simply log in to your brokerage account and navigate to the trading section. From there, you’d enter the stock’s ticker symbol and the number of shares you’d like to sell.

Whether it makes sense to sell McDonald’s stock you own can depend on where you are financially and what’s going on with the market overall. McDonald’s is generally the kind of stock you buy and hold onto for the long term, in the hopes that it will go up in value over time. If you’re still several years away from retirement, it may not be time to sell your shares yet. When you do decide to sell, it’s important to consider market conditions and potential tax implications.

Selling at a price point above what you paid for the stock triggers capital gains tax. The good news is that if you’ve held the stock for longer than one year, the more favorable long-term capital gains tax rate applies. Should you sell when prices are down, you may realize a capital loss rather than a capital gain. Capital losses can be used to offset capital gains through tax-loss harvesting. That’s something you can talk to a tax expert or your financial advisor about.

The Bottom Line

© Provided by SmartAsset how to buy mcdonalds stock

The process for how to buy McDonald’s stock is straightforward and there’s no real difference from buying any other stock. The most important aspect is considering how McDonald’s stock aligns with your investment goals and how much you can afford to invest. Choosing the right brokerage also matters for keeping trading fees to a minimum.

Investing Tips

  • Consider talking to your financial advisor about the pros and cons of owning McDonald’s stock and whether it’s right for you. If you don’t have a financial advisor yet, finding one doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you only have a little money to invest in McDonald’s stock or other stocks, then a platform that offers fractional share trading may be a good place to start. Fractional share trading allows you to purchase shares of stock incrementally, allowing you to invest small amounts at a time. Given that the average price of McDonald’s stock routinely hovers above $200 per share, that may be an attractive option if you’re a beginning investor.

Photo credit: ©iStock.com/sturti, ©iStock.com/xijian, ©iStock.com/Yaroslav Olieinikov

The post How to Buy McDonald’s (MCD) Stock appeared first on SmartAsset Blog.

Continue Reading