With a market capitalization of more than $ 583 billion ($ 450 billion), Johnson & Johnson is one of the largest healthcare companies in the world and has a product line that includes pharmaceuticals, devices and consumables.
No wonder, then, that you may want to invest in this blue chip company that cares about millions of people around the world every year.
How to Buy Johnson & Johnson |
1. Choose a brokerage
To buy any stock, you need an investment account. If you do not already have one or prefer to choose a new one, you can go to our list of the best online brokers and the best investment applications to help you choose.
You will want to choose a platform that allows you to trade easily with low or zero trading rates and minimums. Consider whether a brokerage also has the type of account you need.
In Canada, almost all major online brokerages, from Questrade to WealthSimple, offer the ability to put any type of investment vehicle, including stocks, into a registered account with tax benefits, such as a Registered Retirement Savings Plan (RRSP). , a tax-free savings account (TFSA) or even a registered education savings plan (RESP) to save for your child’s education.
2. Decide on your investment goals
Before you buy JNJ, you must first make sure that the stock purchase is in line with your broader financial goals.
Why invest? For income? If so, JNJ has a current dividend rate of approximately 2.5%. While that’s not bad – it’s certainly more than you would earn even with the most generous promotional interest rates in a savings account – it’s still less than you could earn elsewhere with comparatively safer investments, such as bonuses.
Keep in mind, if you are receiving a JNJ dividend as a Canadian, you will have to pay at least a 15% withholding tax to the IRS under Canada’s tax treaty with the United States. If you want 15% and not the typical 30% for foreign investment, you must have submitted a W-8 BEN form with your brokerage. The IRS recognizes the deferred tax status of the RRSP, so the best place to put a stock that pays a dividend like JNJ is within an RRSP so you don’t have to pay withholding or any taxes.
If your goal is to grow your portfolio, you may want to reconsider. Johnson & Johnson is an old and established company, so while the company’s stock is usually appreciated every year, it doesn’t usually achieve the same growth rate it could get by investing in smaller-cap stocks or growth stocks.
Instead, JNJ can best be seen as a pillar of an investment portfolio, offering steady returns that can help protect the core of your investment in good and bad times.
3. Determine what you want to invest
You probably don’t want to participate in JNJ. This means you have to decide how much you can invest in the business. To calculate this amount, please note the following:
- What is your budget? Ideally, you should only invest what you don’t need to cover your usual expenses and contributions to retirement accounts and emergency funds. Once you have those bases covered, you can invest what’s left in JNJ and other stocks.
- What is the current price of JNJ? JNJ’s price has exceeded $ 100 for over five years. If you do not have enough to buy individual shares or you prefer to distribute your money among many different companies, you will need to find an investment platform that allows you to buy split shares. These allow you to buy small portions of shares, so you don’t have to pay the full face value of one share.
- What is your investment strategy? People usually invest in two ways: with a large sum at a time or with small amounts consistently over time. This second method, called the average cost of the dollar, can help you pay less per share over time on average, as well as reduce the risk of buying more when the price is high.
- What about your other investments? You probably won’t start or end your investment journey with JNJ. Instead, you will want to complement other investments in your portfolio. This means that you will want to invest in a variety of similar and different stocks to offer diversification and reduce the overall risk of your portfolio.
4. Evaluate Johnson & Johnson’s finances
As a public company, Johnson & Johnson is legally required to disclose certain information about its internal operations, including its financial position. So before you buy JNJ stock, take the time to review these figures and make sure you are comfortable with their management.
You can find this information through the JNJ Investor Resources page or using the database of the United States Securities and Exchange Commission (SEC). You may want to supplement it with analysis of Globe Investor’s research resources or the educational offerings of its brokerage.
5. Determine your order type and place your order
To buy Johnson & Johnson shares, sign in to their brokerage platform, enter your ticker (JNJ), and enter the number of shares or dollar value you want to buy. You may also need to choose the type of order you want to fill. Two of the most common are market orders and limited.
If you definitely want to buy JNJ shares, your best bet is to keep it simple with a market order; this is where you buy stock at the current market price, even if it fluctuates slightly after you place your order.
If you only want to buy stocks at a certain price, consider a limit order. This type of order allows you to decide the maximum amount you want to pay per share, and the order is only made if the shares can be bought at that price or less. Please note, however, that if the stock increases before you place your order, it may not run.
For highly volatile stocks, a limit order can be very helpful in preventing you from buying a stock unexpectedly for more than you would expect with a market order.
6. Beware of currency conversion rates
Whenever you buy a US stock in Canadian dollars, you will pay currency conversion rates in addition to the normal exchange rate. These rates range from 1% to 4% when you buy and are charged back when you sell and your money is converted back into Canadian dollars.
They can be avoided by opening a US dollar bank account at a Canadian bank and keeping the money you use to buy US dollar shares at all times or you can carry Norbert’s Gambit.
Norbert’s Gambit is when you buy a stock or ETF that is listed on US and Canadian stock exchanges. You buy Canadian shares of those stocks, then ask your brokerage to “register” your Canadian shares on the U.S. stock exchange and convert them into U.S. shares of the same stock. Then sell your US shares and you can use the resulting US dollars to buy the US shares or ETFs you want (including JNJ) without converting currency.
How to sell Johnson & Johnson shares
When you decide to sell your J and J shares, the process is mostly the same as buying: all you have to do is log in to your brokerage account and enter an online sell order with the number of shares or dollar value that you want to sell. As with purchases, when you sell stocks you can do so at market price or at a set price limit.
Taxes are also an important consideration when selling stocks. If you buy your shares on an RRSP or TFSA (for non-dividend-paying shares), you don’t have to worry about this. However, if you buy shares in a regular investment account and sell them at a profit, you may face additional taxes, such as capital gains.
The good news is that Canadians only have to pay capital gains to the CRA in their Canadian income tax, which is 50% of the value, and they will not have to pay capital gains to the IRS unless they have a stake above 5%. in an American corporation that considers its main U.S. real estate asset.
If you earn $ 5 million on your U.S.-based investment, your estate will owe an IRS property tax when you die.
If you are positioned to make significant profits, talk to a tax professional to work out strategies to minimize your taxes in Canada and the United States.
Other ways to invest in JNJ
If you want to invest in JNJ but don’t want to take risks in individual stocks, you can buy indexed funds and publicly traded funds (ETFs) that lower your risk but still provide exposure to stocks like Johnson & Johnson.
Fortunately, as the 12th largest component of the S&P 500, it’s easy to find funds that invest in JNJ. S&P 500 funds will generally go to just over 1% for Johnson & Johnson.