How to Invest In Google Stock: GOOGL or GOOG?

In recent years, global technological advancements have been transforming current business models and industry structures. As technology's influence on the global economy grows, artificial intelligence is increasingly showing its robust growth potential. Google, as a leading company in artificial intelligence, has drawn significant attention from investors with its stock performance. In this article, we will guide you on how to invest in Google stocks.

Google Stock Introduction

Google is involved in many types of businesses and covers a wide range, which can be mainly divided into Google services, Google Cloud and other innovative businesses.

Google services include advertising business (Chrome browser and Google search advertising, Youtube advertising, network alliance advertising, etc.) and other businesses (Android, Hardware, Youtube Subscription).

Google Cloud can be divided into Google Cloud Platform and Google Work Space, which provide cloud services and assist in office work.

Other businesses are mainly cutting-edge innovative businesses.

How to Buy Google Stock？

Find a Suitable Stockbroker: Choose a reliable and reputable stockbroker that offers access to U.S. stock markets.

Register a Verified Stock Trading Account: Sign up for a stock trading account and complete the verification process.

Log into Your Trading Account and Fund It: After registration, log into your account and deposit the required funds.

Research the Stock and Choose the Right Time to Enter: Conduct thorough research on Google stock and determine the optimal time to buy.

Enter Googles Stock Code (GOOGL, GOOG) and Complete the Purchase: Use the stock code for Google (either GOOGL or GOOG) to execute your purchase.

Monitor Stock Price Changes in Real-Time: After purchasing, keep an eye on stock price fluctuations to manage your investment effectively.

Why Did Google Stock Split？

When a company goes public to raise capital, the primary risks faced by founders and executives include equity dilution and loss of control. This occurs because voting rights are typically distributed in proportion to the number of shares held, so issuing new shares dilutes the voting power of founders and insiders.

A dual-class share structure, like the one used by Alphabet (Google's parent company) with its Class A and Class C shares, is an effective mechanism to help founders and insiders retain control of the company after it goes public. By introducing a multi-class structure, founders and executives can maintain control over company decisions even after the IPO.

For example, in Alphabets structure, holders of Class B shares have 10 votes per share, whereas Class A (GOOGL) shares carry one vote per share, and Class C (GOOG) shares have no voting rights. This arrangement allows public investors to hold significant numbers of Class A and Class C shares, while holders of Class B shares—usually the founders and insiders—retain the ability to steer major company decisions.

The Role of Corporate Voting Rights

Voting rights play a crucial role in corporate governance, as they allow shareholders to have a direct impact on the management and strategic decisions of a company. Shareholders with voting rights can influence key aspects such as the election of the board of directors, approval of mergers and acquisitions, and the formulation of company policies. This power enables shareholders to oversee and shape the direction of the company, ensuring that its decisions align with their interests and values.

However, the influence of voting rights can sometimes be limited. For instance, in the case of Alphabet, founders Larry Page and Sergey Brin retain ultimate control over major decisions through their ownership of high-voting Class B shares. While ordinary shareholders also possess voting rights, the founders' influence in corporate governance far outweighs that of other shareholders. This dynamic allows the founders to steer the company according to their vision, even if it diverges from the preferences of the broader shareholder base.

What Are the Differences Between GOOG and GOOGL？

Voting Rights Difference

GOOGL (Class A Shares): Holders of GOOGL shares have voting rights, with each share granting one vote. This means GOOGL shareholders have a certain level of influence in the companys decision-making process, such as voting for board members or approving major corporate decisions.

GOOGLE Class B Common Stock (Class B Shares): These shares are not publicly traded and are held by Alphabet‘s founders and insiders. Class B shares carry 10 votes per share, ensuring that founders Larry Page and Sergey Brin maintain control over the company’s direction and major decisions.

GOOG (Class C Shares): Holders of GOOG shares do not have voting rights. These shares are typically purchased by investors who are more focused on price appreciation rather than corporate governance.

Price Difference

GOOGL vs. GOOG: GOOGL shares typically have a slightly higher price than GOOG shares, reflecting the value of the voting rights. However, the price difference between the two is generally small and can fluctuate based on market conditions.

Liquidity and Volatility Difference

GOOGL Stock: With voting rights, GOOGL shares tend to have higher trading volume and greater liquidity, making them more actively traded in the market.

GOOG Stock: Without voting rights, GOOG shares generally have lower trading volume, leading to less liquidity. This can make GOOG shares slightly less volatile but also less appealing to investors who value the ability to influence corporate decisions.

GOOGL vs. GOOG: Which One Should Stock Investors Choose？

For investors, the choice between different classes of Google stock depends on personal goals and the company's situation. Some investors may prioritize corporate governance and prefer shares with voting rights (GOOGL), while others may focus more on investment returns and accept non-voting shares (GOOG), hoping to profit from price fluctuations.

However, it's important to note that gaining significant influence over the company by purchasing Google A-class shares on the secondary market is challenging, as insiders hold most of the B-class shares, making it difficult for investors to obtain decision-making power.

Overall, the price fluctuations and returns of Google A-class and C-class shares are similar, so investors should prioritize timing their purchases to secure a lower cost basis for future returns.

Conclusion

In summary, a multi-class stock structure not only helps founders and insiders maintain control over the company but also provides investors with various options to meet different investment needs. The importance of voting rights lies in granting shareholders the ability to participate in the company's decision-making process, but in certain cases, the management's or founders' shareholding structure may significantly impact its actual effectiveness.

Investors should conduct thorough fundamental research when investing in stocks and avoid blindly choosing stocks in pursuit of short-term gains. Continuous learning throughout the investment process is essential for achieving long-term profitability.

FAQs

What is the impact of Google's split into three stock classes on investors？

Long-Term Investors: May not be significantly concerned with the differences between the stock classes (GOOGL vs. GOOG), as their long-term performance is generally similar. Long-term investors focus more on overall company performance rather than the specifics of voting rights or short-term price differences.

Short-Term Traders: May pay close attention to the price differences between GOOGL and GOOG to identify trading opportunities. The slight price discrepancies between the two can be leveraged for short-term gains.

Socially Responsible Investors: May prefer GOOGL due to its voting rights, which allow them to have a say in company decisions. This appeal is particularly strong for investors who value corporate governance and want to influence company policies and management.

What are the risks of buying Google stock？

Market Risks: Googles stock price can be affected by geopolitical events, economic downturns, and unexpected events that impact the broader financial market, leading to potential declines in stock value.

Company-Specific Risks: Risks related to the company‘s performance, such as increased competition in the tech industry, could affect Google’s revenue and profitability, which in turn may lead to a drop in stock prices.

Regulatory Risks: Google may face regulatory scrutiny and antitrust investigations, particularly in the U.S., which could have a short-term impact on the stock price due to potential legal and compliance costs.

Can I get dividends from buying Google stock？

GOOGL (A-Class) and GOOG (C-Class) had not paid dividends before 2024, choosing instead to reinvest profits into business growth and innovation. However, in April 2024, Alphabet announced its first dividend payment.