Since its founding about a decade ago, Nu Holdings (NU -1.45%) has grown into one of the world's largest digital financial services platforms. The company started on its journey to disrupt the financial services industry by launching a purple no-fee credit card in Brazil, a country known for its high-fee, low-tech financial system. It now serves over 85 million customers across Brazil, Mexico, and Colombia.
- Spending solutions: Credit and debit cards and mobile payments
- Savings solutions: Personal and business accounts, including checking and savings accounts
- Investing solutions: Investment accounts
- Borrowing solutions: Personal loans and buy now, pay later
- Protecting solutions: Life insurance and funeral benefits
The company's growth potential has caught the attention of investors, including Warren Buffett. His company, Berkshire Hathaway (BRK.A -0.0%)(BRK.B -0.11%), invested $500 million into Nu Holdings in 2021 before it completed its initial public offering (IPO).
Buffett's investment in the company and its growth potential might have you considering investing in its stock. Here's a step-by-step guide on how to buy shares of the fintech stock and some factors to consider before adding it to your portfolio.
How to buy
How to buy Nu Holdings stockThere are a few steps you'll need to take before buying shares of Nu Holdings. This guide will show you how to go about adding the digital financial services platform to your portfolio.
Step 1: Open a brokerage account
You'll want to open and fund a brokerage account before buying shares of any company. If you need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.
Step 2: Figure out your budgetBefore making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to figure out how to allocate that money.
The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years. You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.
Step 3: Do your research
It's essential to thoroughly research a company before buying its shares. You should learn about its competitors, its balance sheet, how it makes money, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term. Continue reading to learn more about some crucial factors to consider before investing in Nu Holdings stock.
Step 4: Place an orderOnce you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares
- The stock ticker (NU for Nu Holdings)
- Whether you want to place a limit order or market order (The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the market price.)
Should I invest?
Should I invest in Nu Holdings?You must thoroughly research any company before investing in its stock. On the one hand, the process might lead you to discover something that changes your mind about buying shares. On the other hand, it could further confirm your conviction that the stock is an attractive investment. With that in mind, here are some reasons why you might want to buy shares of Nu Holdings:
- You're seeking a high-growth investment opportunity.
- You think shares of Nu Holdings can meaningfully outperform the S&P 500 over the next three to five years.
- You believe Nu Holdings could disrupt the banking system in Latin America.
- You like to invest in founder-led companies.
- You like to follow Warren Buffett and invest in stocks his company owns.
- You don't need to earn dividend income from your investment.
- Investing in Nu Holdings would help you build a more diversified portfolio by adding some exposure to the financial sector and Latin America.
- You're comfortable with Nu Holdings' lofty valuation, which you think the company will grow into eventually.
- You understand the risks, including the possibility that shares of Nu Holdings could lose value.
- You're cautious about investing in companies based outside the U.S. and Latin America in particular.
- You already own several financial stocks.
- You're concerned about the global economy and worry that a recession could slow Nu Holdings' growth and potentially impact its earnings if customers were to fall behind on paying their credit cards or other loans.
- You're a bit concerned about Nu Holdings' higher valuation.
- You're seeking investments with lower stock price volatility than Nu Holdings.
- You're not really a fan of Warren Buffett or his investing style.
- You're in or nearing retirement and need investments that generate income.
Is Nu Holdings profitable?Crunching the numbers and analyzing a company's profitability is crucial to an investor's stock research process. Earnings growth typically powers stock price performance over the longer term.
Does Nu Holdings pay a dividend?
Nu Holdings had not initiated a dividend as of mid-2023. The company is still relatively young (it launched in 2013 and completed its IPO in 2021). It currently has no plans to start making dividend payments. While profitable, Nu retains those earnings to fund its operations and continued expansion.
ETFs with exposure to Nu Holdings
Instead of buying shares directly and actively investing in Nu Holdings, investors could go the passive investment route by buying a fund that holds its stock. One of the most common passive investment vehicles is an exchange-traded fund (ETF).
According to ETFChannel.com, 21 ETFs held shares of Nu Holdings as of mid-2023. The iShares Latin America 40 ETF (ILF -2.15%) was the largest holder, with more than $50 million in shares. It was the fund's ninth-largest holding at 3.6% of the total. That decent allocation makes this ETF a solid option for investors who want to gain some passive exposure to Nu Holdings and other top stocks from Latin America.
Will Nu Holdings stock split?
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The bottom line on Nu HoldingsNu Holdings has grown phenomenally over the past decade by adding new financial products and services and expanding into additional Latin American countries. It's still only scratching the surface of its potential, so it could continue delivering rapidly rising revenue and profits for investors, which could drive its stock price higher over the longer term.While Nu Holdings has tremendous growth potential, it might not be the best stock for everyone. It trades at a lofty valuation and operates in Latin America, which tends to be a riskier region for investors. Investors must thoroughly understand the company and its risks before buying shares.
Investing in Nu Holdings FAQs
Is Nu Holdings a good stock to buy?
On the downside, Nu Holdings traded at a relatively elevated valuation, at 35 times its forward earnings and almost eight times its price-to-sales ratio in mid-2023. It will need to continue growing rapidly to justify that valuation. While its stock price could be volatile, it has all the makings of a good stock to buy, especially for those seeking a high-growth opportunity.