With a market cap of more than $ 583 billion ($ 450 billion USD), Johnson & Johnson is one of the world’s largest healthcare companies with a range of products that cover drugs, devices and consumables.
So, it’s no wonder you may want to invest in this Blue Chip company that cares for 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 don’t already have one or just want to choose a new one, you can go to our list of best online brokers and the best investment apps to help you choose.
You want to choose a platform that allows easy stock trading with little or no trading fees and minimums. Consider if the brokerage has the type of account you need.
In Canada, all major online brokerages, from Questrade to Wealthsimple, offer the ability to place any type of investment vehicle, including stocks, into a registered tax-advantaged account, such as the Registered Retirement Savings Plan (RRSP). A Tax-Free Savings Account (TFSA) or a Registered Education Savings Plan (RESP) to save for your child’s education.
2. Determine your investment goals
Before you buy JNJ, you must first make sure you buy the shares in line with your broader financial goals.
Why are you investing? For income? If so, JNJ currently has a dividend rate of about 2.5%. While it’s not bad — it’s certainly more than you can earn at the most generous promotional interest rates in a savings account — it’s less than you would earn elsewhere with relatively safe investments, such as bonds.
Keep in mind, if you are collecting dividends from JNJ as a Canadian, you will have to pay at least 15% withholding tax to the Canadian tax treaty, the IRS. If you want 15% for foreign investors and 30% for a typical one, you must submit a W-8 BEN form with your brokerage. The IRS recognizes the tax-deferred status of the RRSP so the best place to place a dividend paying stock like JNJ is within the RRSP so you don’t have to pay withholding tax or any other tax.
If your goal for investment is to drive growth in your portfolio, you may want to reconsider. Johnson & Johnson is an old and established company, so while the company’s stock appreciates every year, it does not achieve the same growth rate you would get by investing in small-cap stocks or growth stocks.
Instead, JNJ can be viewed as a pillar of investment capital, offering a steady return that helps protect your investment pulse in good times and bad.
3. Decide how much you want to invest
Chances are you don’t want to access all of them at JNJ. This means you have to decide how much you can invest in the company. To calculate that amount, consider the following:
- What is your budget? Ideally you should only invest what you don’t need to cover your regular expenses and contributions to retirement accounts and emergency funds. Once you have those bases covered, you are free to invest in any remaining of JNJ and other stocks.
- How much is JNJ’s current price? The price of JNJ has been more than $ 100 for over five years. If you don’t have enough to buy a single share or you want to spread your money across different companies, you need to find an investment platform that allows you to buy partial shares. These allow you to buy smaller parts of the stack so you don’t have to fork over the entire face value of the stack.
- What is your investment strategy? People usually invest in one of two ways: with a large sum at a time or with a small amount consistently over time. This second method, known as the dollar-cost averaging, helps you pay less per share on average and reduces the risk that you will buy more when the price is higher.
- What about your other investments? You probably won’t start and end your investment journey with JNJ. Instead, you want to complement other investments in your portfolio. This means that you want to invest in a range of similar and different stocks to provide 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 functions, including its financial condition. So before you buy JNJ’s stock, take the time to review these figures and make sure you are comfortable with how it is being conducted.
You can find this information through JNJ’s Investor Resources page or by using the US Security and Exchange Commission’s (SEC) database. You may want to supplement it with an analysis of research resources in the Globe Investor or your brokerage’s educational offerings.
5. Determine the type of your order and place your order
To buy Johnson & Johnson stock, log into your brokerage platform, enter its ticker (JNJ) and enter the number or dollar value of the shares you want to buy. You may also need to choose what type of order you want to fill out. Two of the most common are market and limit orders.
If you definitely want to buy shares of JNJ, your best bet is to keep it simple with a market order – even if it fluctuates a bit after you enter your order, you are buying the stock at the prevailing market price.
If you want to buy shares for a specific price only, consider the limit order. This order type allows you to determine the maximum amount you want to shell out per share and will only order if the shares can be purchased at that price or lower. However, keep in mind that if the stock rises before entering your order, it cannot be executed.
For very volatile stocks, the threshold order is very useful in preventing you from buying the stock unexpectedly at a higher price than you would like with a market order.
6. Note the currency conversion fee
When you buy American stock with Canadian dollars, you pay the currency conversion fee on the regular exchange rate. These charges range from 1% to 4% when you buy and are charged again when you sell and convert your money back into Canadian dollars.
You can bypass US Dollar Bank Accounts in the Bank of Canada and keep the money you use to buy US Stocks in US Dollars at all times, or you can manage Norbert’s Gambit.
Norbert’s Gambit is when you buy an interlisted stock or ETF on American and Canadian stock exchanges. You buy Canadian shares of that stock, then you ask your brokerage to “journal over” your Canadian shares to the American list and make them American shares of the same stock. You can then sell your American stock and use US dollars to buy any American stock or ETF you want (including JNJ) without converting the currency.
How to Sell Johnson & Johnson Shares
When you decide to sell your J&J stock, the process is often the same as buying – all you have to do is log in to your brokerage account and enter the sales order online with the amount or dollar value of the shares you want to sell. As with purchases, when you sell a stock you can do so at a market price or with a fixed threshold price.
Taxes are also an important consideration when selling shares. If you buy your shares in RRSP or TFSA (for shares that don’t pay dividends) then you don’t have to worry about this. However, if you buy shares in a general 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 on their Canadian income tax, which is 50% of the value, and they don’t have to pay capital gains to the IRS unless they own more than 5%. In the American Corporation, whose primary assets are US real estate.
If you happen to make $ 5 million USD in your US based investments, your estate will have to pay the estate tax to the IRS when you die.
If you are in a position to make significant gains, talk to a tax professional to devise strategies to reduce your taxes in Canada and the US
Other ways to invest in JNJ
If you want to invest in JNJ but don’t want to risk owning individual stocks, you can instead buy shares in Index Funds and Exchange-Traded Funds (ETFs) that reduce your risk but also exposure to shares such as Johnson & Johnson.
Fortunately, as the 12th largest unit of the S&P 500, it’s easy to find money to invest in JNJ. S&P 500 funds generally allocate more than 1% to Johnson & Johnson.