Can buying Amazon today give you lifelong?

I don't recommend putting your entire nest egg in one stock. Your life savings and retirement plans are part of a diversified portfolio. You can simulate this low-risk approach by market tracking exchange-traded funds, e.g. Vanguard S&P 500 ETF (Nysemkt: Flying). It's hard to come up with a stock that you can always trust your entire wealth.

Having said that, Amazon (NASDAQ: AMZN) I became one of my best cornerstones for a diversified long-term portfolio. The giants of e-commerce, artificial intelligence (AI) and cloud computing have lasted for decades. It operates in several powerful industries. As the market changes, the company is also flexible enough to find and pursue brand new business ideas.

So, how close is Amazon to its fabulous single-stock investment strategy? Let's take a look.

Amazon has a long history of innovation. Founder Jeff Bezos founded one of the earliest successful e-commerce stores. Simple bookstores expand into music and videos, and then jump into consumer electronics and household goods. These days, you can buy anything from a Chinese-made disc sponge to a new car on Amazon.com.

The online store is Amazon's Granite Foundation. Amazon, which combines domestic and international retail businesses, collected $530 billion in e-commerce revenue last year, generating $28.8 billion in operating income. In these dappled segments, I'm looking at Amazon's in-house product sales, such as the Echo and Fire Lines for consumer electronics, or the Amazon Basics Basics range of home standards such as batteries and gloves. I also see Amazon adding its shipping centers through third-party distributors. Of course, there is also a large Amazon marketplace where anyone can offer products through a trusted Amazon shopping experience. It's all wrapped up in world-class shipping services and several payment options.

Then there is the Amazon Web Services (AWS) segment. Products that were originally purely (and early) cloud computing products have expanded into related fields such as AI services, high-speed databases and Amazon's own semiconductor design. A variety of AWS products together generated $100.8 billion in net sales in 2024. AWS also paid most of Amazon's operating profits at an estimated $39.8 billion.

As a result, Amazon runs several successful businesses, in which the huge scale of the e-commerce sector allows companies to seize opportunities and invest in their infrastructure. At the same time, the AWS arm generates huge operating profits. It's a diversified business model, especially when you consider the broader scope of your online shopping portfolio. But this can still be boiled down to two core actions, which is not enough to protect Amazon from the global economy.

Amazon’s free cash flow, for example, soared in the 2020 pandemic lockdown era, but collapsed in 2022. Amazon is vulnerable to higher inflation and reduced consumer confidence. More diversified companies Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) During tough times, rely on necessary staple foods such as socks, insurance and rail transport services.

Amazon is diversified, but it really can't compete with Berkshire or your favorite index fund.

People with credit card, laptop and smartphone on dining table.
Image source: Getty Images.

Not only is the company successful and profitable, it also shows a knack for adapting to changing market reality. Amazon has been a useful part of my own portfolio since 2017 and I just wish I had added it earlier. In my opinion, Amazon's stock is a reasonable part of any long-term stock portfolio.

I just won't use it as the only stock I've bought. And I don't believe that now will be the best time to make a very large Amazon investment. The economy looks shaky and unpredictable, perhaps causing Amazon owners to pay another painful price correction, such as the 2022 downturn.

If you are going to add Amazon to your stock portfolio today, I recommend a slower approach. Despite the risky market conditions, the average dollar cost can help you build a new position. Over time, automated purchases, and when the price is low, you just need to get more U.S. shares in the U.S. dollar. Launching such an emotionally-free investment plan may be the best way to approach a new Amazon job in 2025.

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John Mackey, former CEO of Amazon's subsidiary Whole Foods Market, is a member of the board of directors of Motley Fool. Anders Bylund has positions in Amazon and Vanguard S&P 500 ETFs. Motley Fool has a location and recommends Amazon, Berkshire Hathaway and Vanguard S&P 500 ETFs. Motley Fool has a disclosure policy.

Can buying Amazon today give you lifelong? Originally published by Motley Fool