Microsoft Corporation is a technology company that generates revenue by developing, licensing and supporting a range of software products and services, by designing and selling hardware, and by delivering online advertising.
Products include operating systems for personal computers, servers, phones, and other intelligent devices, server applications for distributed computing environments, business applications, desktop and server management tools, software development tools and online advertising.
Microsoft also designs and sells hardware including the Xbox 360 gaming and entertainment console.
The company offers cloud-based solutions that provide customers with software, services, and content over the internet by way of shared computing resources located in centralised data centres. Cloud revenue is primarily earned from usage fees and advertising.
Microsoft recently disclosed a multi-year, multi-billion-dollar investment in Open AI, the company behind the artificial intelligence program ChatGPT.
What’s the latest from Microsoft?
These are Microsoft’s performance figures from the fiscal third quarter of last year, published on 26 April 2023:
Fiscal third quarter revenue $52.9 billion, up 7% year-on-year
Net income $18.3 billion, up 9% year-on-year
Earnings per share $2.46, up 10% year-on-year
Microsoft Cloud revenue $28.5 billion, up 22% year-on-year
Here’s what you need to know about buying and selling Microsoft shares.
Note: investing in company shares comes with no guarantees. When buying shares, it is possible to lose some, or even all, of your money.
How to buy Microsoft shares
Before you decide to open an account, you should set your investment goals, including the amount you wish to invest, the length of time you plan to invest for, whether you are comfortable with the risks involved and whether you can afford to lose the money.
If you are looking to buy Microsoft shares, the following steps will guide you through the process:
1) Open a trading account
Whether you’re an experienced share trader, or a beginner, you’ll need to open an account with a trading platform.
It’s worth taking the time to review the costs involved - most, but not all, platforms charge a share trading fee and some may also charge an annual platform fee for holding shares.
There are a variety of trading platforms available, from online DIY platforms such as Hargreaves Lansdown, AJ Bell and interactive investor, to app-based platforms such as eToro and Trading212.
2) Where is Microsoft traded?
The ticker symbol for Microsoft is MSFT. Microsoft is traded on the Nasdaq in the US which is open for trading from 9.30am to 4pm (Eastern time) from Monday to Friday.
Most trading platforms allow you to purchase US shares. You will be charged a foreign exchange fee (typically around 1%, but may range from 0.15% to 1.5% depending on your platform). Many platforms also charge a slightly higher trading fee for buying US shares.
If you plan to trade US shares regularly, it’s worth looking at the different platforms as their fees can vary significantly. A small number of trading platforms, such as IG, allow you to hold your account in US dollars which may reduce the foreign exchange you have to pay.
You will be requested to complete a W-8BEN form which allows you to benefit from a reduction in withholding tax from 30% to 15% for qualifying US dividends and interest.
You will also have a foreign exchange exposure if you hold US shares. If the pound weakens against the dollar, your shares will be worth more in pounds sterling (and vice versa).
As with UK shares, any profit on US shares will be subject to Capital Gains Tax, subject to your annual allowance (currently £12,300). You will not have to pay Capital Gains Tax if you hold the shares in an Individual Savings Account or Self-Invested Personal Pension.
3) Do your research
To find out more about Microsoft, visit the company’s investor relations page.
It’s also worth comparing Microsoft’s valuation to other comparable global software companies. One way is to look at the relative price-earnings ratios - shares trading on a high price-earnings ratio have high expectations of significant growth in the future.
Another useful research tool is brokers’ 12-month share price forecasts, which are available on financial websites. There are currently nearly 40 brokers following Microsoft shares, and their price forecasts give an indication of the upside and downside risk of the Microsoft share price over the next year.
4) Should you invest on a monthly basis or as a lump sum?
People tend to buy shares either as a lump sum purchase, or drip-feed their investment on a monthly basis over time.
Monthly investing is often referred to as a means of ‘pound cost averaging’, whereby making regular contributions helps to smooth out the highs and lows of the stock market. This provides some protection if the share price falls after you have bought shares, as you will effectively invest at the average share price over the whole period.
However, drip-feeding your investment may sacrifice capital growth if the share price is rising and you may also pay more in share trading fees.
5) Place your order
Once you’re ready to buy shares in Microsoft, log in to your trading account. Type in the ticker symbol MSFT and the number of shares you want to buy, or the amount of money you want to invest.
Many platforms also allow you to add a ‘stop loss’ after you’ve bought the shares, which allows you to limit your losses if the share price falls. For example, if you buy shares at £100, and set a stop loss of £90, your shares would be sold if the share price falls below £90, limiting your potential loss to 10%.
6) Monitor Microsoft’s performance
Whether you hold shares in just a few, or many, companies, you should review how your shares are performing on a regular basis.
Monitoring your portfolio allows you to make any necessary adjustments, whether buying additional shares, or selling part of your holding.
How to sell your Microsoft shares
When you want to sell your Microsoft shares, log in to your trading platform, type in the ticker symbol (MSFT) and select the number of shares you want to sell.
If you’ve made a profit, you may have to pay Capital Gains Tax (CGT) on the sale of your shares. However, as mentioned earlier, this is not the case for tax-exempt wrappers such as Individual Savings Accounts.
How to invest in Microsoft indirectly
You may make a profit if you invest in Microsoft shares, however, holding shares in an individual company is higher risk than investing in a wide range of shares. A diversified portfolio should also reduce volatility.
One option is to invest indirectly in Microsoft by investing in a fund, investment trust or exchange-traded fund (ETF) that holds Microsoft shares, amongst others. These products provide a ready-made portfolio of shares in a number of different companies.
There is a wide range of options, including global, US and technology funds and investment trusts, together with ETFs that track the Nasdaq index. However, you will pay an annual management fee for holding these products.