How to Buy Nike (NKE) Stock – Forbes Advisor Canada

Perhaps best known for their iconic sneakers, Nike is a manufacturing powerhouse that makes almost every type of athletic gear and apparel you can dream of. That’s led to impressive financial numbers: In fiscal 2021, Nike’s revenue grew 19% to a whopping $57.3 billion ($44.5 billion).

Shareholders were also on the receiving end of the financial success. In the 20-year period from January 2001 to January 2021, Nike’s stock price rose about 2,000% — from $8.73 ($6.77) to over $180 ($140) per share. But investors with a short-term perspective were also able to ride the rise of the swoosh. From early January 2019 to January 2022, Nike’s price had increased by over 80%.

If all of this inspires you to apply Nike’s “Just do it” slogan to your investments, here’s how to buy Nike stock.

How to buy Nike (NKE) stock.

1. Choose a brokerage

To buy Nike stock, you need a brokerage account. If you don’t already have one, you need to open one – ideally with a firm with no trading fees and low minimum investment requirements. To speed up your search process, check out our list of the best online brokers and best investment apps.

You should also consider your financial goals. If you want to invest for retirement, choose a Registered Retirement Savings (RRSP). These types of accounts are tax-exempt for retirement savings because they aren’t taxed until you withdraw the money, either at age 71 when you start receiving payments from an RRSP that’s invested in a Registered Retirement Income Fund (RRIF), or if you withdraw the money before that age.

If you’re investing for shorter-term goals or want flexibility in paying out your proceeds, you should probably opt for a taxable account. You don’t get the tax benefits of an RRSP, but you can take profits whenever you want with no penalty or cap on annual investment. You can also participate in tax loss recovery, which allows you to sell investments at a loss to offset other taxable gains you make in a year.

2. Determine how much you can invest

When deciding how much to invest in Nike, ask yourself these four questions:

  • What’s your budget? You don’t want to invest money that you need for your regular expenses or an emergency fund. You should also make sure you have at least something set aside for retirement before you start other types of investments. Once you’ve accounted for these, any additional investments can flow into other investments of your choice, including Nike.
  • What is the current price of NKE? The price of a single Nike share can even be higher than a pair of Jordans. If you can’t sink that much into NKE at once, you might want to look into brokers that offer fractional equity investments so you can buy fractions of shares rather than buying expensive whole shares. This feature is only available with two Canadian brokers. Only Interactive Brokers and WealthSimple allow you to trade fractional shares.
  • What is your investment strategy? There are two main ways people invest: with large one-off investments and with regular, smaller investments. The latter method, called dollar cost averaging, can lower the average price you pay per share over the long term. By buying a fixed dollar amount of an asset no matter how the market moves, you avoid buying a lot when a stock’s price is extremely high. Since it has a low financial barrier to entry, it also helps you get your money to market as quickly as possible, rather than forcing you to wait until you accumulate a large sum.
  • How does Nike fit into your overall portfolio? “I would consider NKE a ‘core holding company,'” says Nathaniel Hoskin, a Certified Financial Planner (CFP) and founder of Hoskin Capital. “The core holdings of a portfolio are very large-cap, well-known companies.” That means they’re less likely to see wild price swings and are less risky than smaller, less established companies. However, you’ll still want a diversified mix of businesses of many different types to grow your money while minimizing your risk over time. This means that NKE should not be the beginning and end of your portfolio.

4. Research NKE’s financial data

Before you buy any stock, you should do your own research on its financials and historical performance. This way you are fully aware of the business operations, growth plans and financial stability.

As a publicly traded American company, the US Securities and Exchange Commission (SEC) requires Nike to file annual and quarterly financial statements. You can view these on Nike’s Investor Relations page or on SEC.gov. You can also supplement these reports with analyst reports and insights found using your broker’s research resources.

One important note: if you research Nike, you may find that there are two classes of shares, class A and B. You only need to worry about class B, as A is not traded on the public market and is primarily owned by Nike’s founding family is held .

The primary differentiating factor between Class A and Class B shares is that Class A shares are convertible into Class B shares on a one-to-one basis (the reverse is not the case) and Class A shares carry the right to elect nine of the 12 members Nike’s board of directors. Class B shares elect the other three, meaning Class A shareholders effectively control the company.

5. Place an order for NKE shares

When you’re ready to buy Nike stock, all you have to do is log into your brokerage account, type in the Nike ticker symbol (NKE) and enter the number of shares (or the dollar value of the shares) you want.

Depending on your preference and brokerage interface, you may need to choose between order types. Market orders are executed immediately at the current trading price and are generally the default when no alternative is selected. Limit orders, on the other hand, wait until a certain price is reached before executing your purchase. This can be a helpful feature for people who expect a stock to drop in value soon.

Because it’s traded on the New York Stock Exchange (NYSE), you can buy and sell Nike shares Monday through Friday from 9:30 a.m. to 4:00 p.m. ET, although your broker may offer longer hours before or after the market close.

6. Be aware of currency conversion fees

Whenever you trade a US stock from Canada, you will incur currency conversion fees when buying and selling. These fees are in addition to the exchange rate and range from 1% to 4%. They are used to convert Canadian dollars into US dollars when buying US stocks and then again when converting those US dollars back into Canadian dollars at the time of sale.

Fortunately, there are ways to avoid these fees. The first option is to reserve your US dollars to buy American stocks in a US dollar bank account with a Canadian bank, so you don’t have to convert your money at all when trading these stocks.

The other way to avoid conversion fees is to run Norbert’s Gambit.

Norbert’s Gambit is when you buy a stock or ETF that is listed on American and Canadian exchanges. You buy Canadian shares of that stock or ETF, then ask your broker to “book” your Canadian shares and convert them into American shares of the same stock, then you sell your American shares in US currency and you can use the US dollars for the earnings to buy any American stocks or ETFs you want, like Nike, without exchanges.

When you sell American stock, you do the opposite. Although you still have to pay commission fees to the broker to run Norbert’s Gambit, the cost is still much less than the conversion fees. However, Norbert’s Gambit is usually only worth executing if you have more than $500 in US stocks, otherwise you just pay the fees.

7. Be aware of the tax implications

If the US stock you buy pays a dividend, you are subject to a 15% withholding tax to the IRS. Canadians actually get a break (other countries have a 30% withholding tax) since Canada has a tax treaty with the US

The only other circumstance in which you owe the IRS taxes on an investment as a Canadian is if you make more than $5 million from your US resident investments. If this is the case, your estate will pay an inheritance tax when you die.

8. Sell your Nike stock

Even the longest-serving investors will eventually need to sell their investments. If you have decided to part with NKE, the process is as simple as your original order.

Log into your investment platform, enter Nike’s ticker symbol and the dollar or stock amount you wish to sell. You can also choose a specific order type if you don’t want to sell at the current market price.

If you’re making significant gains, it may be worth meeting with a tax expert to determine the best way to minimize the capital gains taxes you owe.

As a Canadian, you only owe the CRA capital gains on your investment (50% of the accumulated value) unless the American company in which you have more than 5% investment has US real estate as its primary asset. In this case, you also pay capital gains to the IRS.

How to invest in Nike with mutual funds and ETFs

Nike is a major company with decades of proven revenue and stock growth. But investing in a single company can be risky.

To reduce this risk, experts recommend investing in many companies — or avoiding picking yourself and buying stocks in index funds or exchange-traded funds (ETFs). Since they hold hundreds of company shares, you’re essentially buying shares of an already diversified investment portfolio.

“My advice is to start with the index,” says Hoskin. “That way you don’t feel like you have to fill your portfolio with a lot of stocks right away, and you don’t start with a portfolio of just one or two stocks. Once your portfolio is invested in an index fund, you can start slowly researching a few holdings.”

Many leading index funds and ETFs offer access to Nike. For example, S&P 500 funds invest about 0.5% of their holdings in NKE.

However, if you’re looking to invest in an index fund with even more Nike exposure, you might consider a consumer discretionary index fund like BlackRock’s iShares S&P Global Consumer Discretionary Index ETF (hedged in Canada), which is listed on the TSX is and has NKE as one of the 10 largest holdings.

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