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Whether the words “spin cycle” call to mind a washing machine or a bike probably depends on your lifestyle. But exercise enthusiast or not, you can now invest in fitness without getting off your couch.
Peloton Interactive Inc., which in August filed paperwork in preparation for an initial public offering of its stock, sells exercise bikes and treadmills that stream its exercise classes. Think of it as a gym class in your own home.
Peloton shares will soon start trading under the ticker symbol PTON. Here are four steps to buy Peloton stock when it becomes available:
1. Know your ride
Ready to race to the starting line — that is, buy shares of Peloton? Put on the brakes. Before you buy stock, it’s important to understand the company you’re supporting with your hard-earned dollars. You don’t want your ride with Peloton to be spoiled by major potholes.
Before you buy stock, it’s important to understand the company you’re supporting.
While any type of investment carries risk, investing in an IPO brings unique challenges. Make sure you know what you’re buying. Peloton offers some warnings under the heading “Risk Factors” on its Form S-1, which the company filed with the Securities and Exchange Commission as part of its IPO.
The points investors should consider, as outlined by Peloton: The company has incurred operating losses every year since its inception in 2012, and Peloton relies on being able to license the music that accompanies its workouts and is currently embroiled in litigation around those music licenses.
2. Take a quick tour of your current investments
OK, so you’ve decided you like Peloton, risks and all, because of the growth opportunity.
The next step is to assess whether this stock is right for you. That is, does Peloton fit in your overall investment portfolio?
Here are some questions to consider:
- How many growth stocks do you own currently? If your list of investments is concentrated in high-risk ventures, think carefully about how much risk you’re taking on by adding Peloton. Investment portfolios need balance so that if one company or industry encounters headwinds, only a portion of your portfolio loses value.
- What’s your goal for this money? If this is the portion of your portfolio you’ve dedicated to making bets on individual stocks, then ride on up and buy some shares. But if this is your kid’s college savings, consider investing in what you might call the investment version of a peloton: a mutual fund. In a bicycle-racing peloton, a group of riders bands together to improve performance by reducing overall wind resistance. With a mutual fund, a group of diverse investments works together to improve performance by reducing risk. Your money is spread across a variety of investments, and they’re unlikely to all drop in value at once.
- What’s your time frame for this money? If you’ll need this money in five years or less, you might reconsider investing in stocks altogether. With such a short time frame, a less risky investment is a better move.
3. Open an investment account
No matter what company you want to invest in, generally you’ll need an investment account — also called a brokerage account — to buy shares. If you don’t have one, here’s our guide to opening a brokerage account.
Be sure to compare brokers to find one that meets your needs. For example, if you plan to buy and sell stocks often, you’ll want to find a broker with low trading commissions, such as Robinhood or Interactive Brokers. If you’re willing to pay a little bit more in trading commissions in exchange for access to above-average tools and research, then a broker such as E-Trade or Merrill Edge might fit.
Or, choose from our best brokers for stock trading. Here are some of our top picks for where to open an account:
4. Place your order for Peloton stock
You like Peloton, the stock fits your overall investment goals, and you’ve got your investment account. Now, you’re ready to hop on your new ride, aka Peloton stock.
When you place your order, your broker will ask you for your preferred order type. The two most common order types are a market order and a limit order.
- A market order directs the brokerage to buy the stock as soon as possible. The final price might be a bit higher or lower than the price you saw when you placed the order.
- A limit order directs your broker to buy the stock at a specific price. If the stock isn’t available at that price, your order won’t go through.
» More questions? See our guide on how to buy stocks