Amazon.com, Inc. (AMZN) is the world’s largest online retailer, plus it also has physical stores. The biggest chunk of its revenue comes from sales made on its e-commerce website. Amazon has two kinds of relationships with sellers- first party and third party. In the former, you sell your products to Amazon and Amazon sells them to customers. In the latter, sellers sell their products directly to customers through the Amazon marketplace and have more control. The revenue from third-party seller services has also seen rapid growth in recent years.
However, while retail is a major source of revenue, most of its profits are generated from its cloud computing business, Amazon Web Services (AWS). AWS is the world’s largest cloud infrastructure business, with a big lead over its nearest competitor, Microsoft Azure. Also, Amazon’s advertising business is growing rapidly.
While other retailers are just focusing on just how to deliver cheaper and faster, Amazon in itself is an online retailer, an offline retailer, a cloud services company, and an advertisem*nt company, all rolled into one. Amazon has several other business segments which generate billions of dollars in revenue. It sells products like the e-reader Kindle, the personal assistant Alexa and subscription services like Amazon Prime Videos and audiobooks.
Amazon’s business strategy is primarily growth-oriented, with its focus being on entry and growth in new markets and generating more revenues from the markets it operates in. It then looks to offer new products and services to customers to generate more revenue. Finally, it also looks to diversify, by acquiring new businesses. Driven by such an intensive growth strategy, Amazon has been able to stay ahead of its competition.
How to invest in Amazon shares from India?Here are three ways.
1. Directly invest in Amazon stocks
You can invest in Amazon from India by opening a US brokerage account either through technology platforms like Vested that offers this service, or a foreign brokerage that has a direct presence in India. At Vested, our goal is to allow you to invest in US stocks easily. To invest, you do not need to pay any brokerage fees. Vested’s process is completely paperless and can be completed in a matter of minutes. All you need is your PAN number, an image of your PAN card, and address proof.
To invest in US stocks like Amazon, you need to wire funds to the US. As an Indian resident, you are allowed to do this under the RBI’s Liberalized Remittance Scheme which lets you remit up to US $250,000 per year, per person.
As of January 14, 2022, the Amazon share price was US $3242.76 which is about ₹ 2.4 lakh. However, the high price should not be a deterrent to investing in Amazon shares as Vested offers you the option of fractional investing in shares. So, you can invest in a fraction of an Amazon share for as little as $1 and own a part of the company. To know more about fractional investing watch this video.
2. Invest in ETFs that hold Amazon stocks
The other way you can invest in Amazon stocks from India is through an ETF. ETFs refer to a collection of many stocks/bonds which are traded under one fund. They are similar to mutual funds. However, ETFs are traded on the stock exchange with real-time pricing and provide an easy and cheap way to get exposure to a sector or a group of companies. One option to invest via ETFs is that you buy an ETF on a platform like Vested.
For example, Vested lets you invest in index ETFs like the Invesco QQQ Trust which is based on the NASDAQ 100 index and has Amazon as one of the top holdings.
Another way to invest in Amazon stocks from India is to buy ETFs available in India that invest in US indexes like the Nasdaq 100. The Motilal Oswal Nasdaq 100 ETF in India has Amazon among its top holdings. You can also invest in a fund of fund like Mirae Asset NYSE FANG+ ETF Fund of Fund which has Amazon among one of its ten stocks. Remember, you can invest in these ETFs without opening a new US brokerage account however your returns might be impacted by tracking errors that these ETFs suffer from (we explain this in a video).
3. Invest in Indian mutual funds that have exposure to Amazon stocks
In this case, you will be investing in funds of funds i.e. a local mutual fund that invests in a mutual fund available in the US. Note that there is no investment limit as an investment will be made in Indian rupees. Mutual funds such as Edelweiss’ US Technology Fund of Fund offer exposure to Amazon but often to a limited extent. Also, this approach may turn out to be more costly. You will have to pay an annual expense ratio (fees charged to manage the fund). The expense ratio of these funds tends to be higher, because apart from the general India fund management fee, it also includes an additional expense charged by the underlying international schemes they invest in.
This article would have given you an idea of how to invest in Amazon from India. Remember, before buying any stock, you should understand your risk profile. Investing directly in stocks like Amazon would be a high-risk investment for your portfolio.
Sure, I've got a knack for diving into Amazon and its multifaceted operations. Let's break down the concepts:
Amazon's Business Landscape:
- E-commerce Dominance: Amazon is a global giant in online retail, deriving a substantial portion of its revenue from its e-commerce platform.
- Seller Relationships: It operates through two primary seller models - first-party sales (wherein products are sold directly to Amazon, which then sells them to customers) and third-party sales (sellers directly engage with customers through the Amazon marketplace, retaining more control).
- Revenue Streams: While retail sales contribute significantly to revenue, the lion's share of profits comes from Amazon Web Services (AWS), a leading cloud computing service. Additionally, its advertising business has been growing rapidly.
- Diversified Business Segments: Beyond e-commerce and cloud services, Amazon offers hardware products (like Kindle and Alexa) and subscription-based services (Prime Video, audiobooks).
- Business Strategy: Amazon's growth-oriented strategy focuses on market expansion, revenue generation, introduction of new products/services, and diversification through acquisitions.
Investing in Amazon from India:
- Direct Stock Investment: Indian investors can buy Amazon shares through a US brokerage account (like Vested), leveraging the RBI's Liberalized Remittance Scheme for funds transfer. Fractional investing allows ownership of parts of shares.
- ETF Investments: Investors can opt for Exchange-Traded Funds (ETFs) holding Amazon stocks. These ETFs may be traded on platforms like Vested or available within India (like Motilal Oswal Nasdaq 100 ETF or Mirae Asset NYSE FANG+ ETF Fund of Fund), offering exposure to Amazon among other holdings.
- Indian Mutual Funds: Some Indian mutual funds offer exposure to Amazon stocks through investments in US-based mutual funds, though this might involve higher costs due to expense ratios and limited exposure.
Investment Caution: Investing directly in Amazon or similar stocks involves high risk and requires a clear understanding of one's risk tolerance.
This comprehensive overview guides Indian investors on various avenues to invest in Amazon, considering both direct and indirect routes while highlighting associated risks and considerations.
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