Tesla, Inc. is a US-based company located in Austin, Texas. It specializes in designing and producing electric vehicles (both cars and trucks), as well as stationary battery energy storage devices for homes and larger grids. Additionally, Tesla manufactures solar panels, solar shingles, and offers related products and services.
As of 2023, Tesla is considered one of the most valuable companies globally and holds the title of the world’s most valuable automaker. In 2022, the company dominated the battery electric vehicle market, securing an 18% share.
If you’re considering investing in Tesla, there are two primary approaches: you can either purchase the stock directly or invest in ETFs. This guide will provide you with all the information you need to get started.
How to Buy Tesla Stock
Step 1: Open a Brokerage Account
To invest in Tesla stock, you need to open a brokerage account. If you don’t have one, you can check out our curated list of the best online brokers to help you start your search.
Many brokers now offer fee-free stock trading. But before you start, check if there are any hidden fees or if you need to have a minimum amount in your account. To determine the type of account you need, think about your own investment goals.
- For long-term retirement savings, consider a Roth for tax advantages. If you’ve held your Roth IRA for at least five years, you can withdraw money without paying taxes or penalties. Unlike a Traditional IRA, a Roth IRA doesn’t have mandatory minimum withdrawals.
- If you’re saving for general goals like building wealth or a home down payment, a taxable investment account might be a more viable option. Unlike an IRA or a 401(k), you can withdraw your money at any time, for any reason, with no tax or penalty from a brokerage account.
Step 2: Research Tesla’s Fundamentals
Before investing in any company, including Tesla, it’s important to do thorough research. Here’s what you should do:
Access Tesla’s financial reports, like the annual 10-K and quarterly 10-Q filings. You can find these reports on Tesla’s investor relations website or the Securities and Exchange Commission’s (SEC) database.
Check out expert analyses from trusted sources like Fidelity, Morningstar, or Forbes. Brokerage firms, including those offering major stocks like Tesla, also provide valuable research and commentary. This will give you insights into Tesla’s financial health, growth prospects, and potential risks.
Step 3: Decide How Much to Invest
Before you start investing in Tesla stock, set your investment budget. The amount of money you invest is typically determined by the following factors:
- Portfolio Integration: Consider how much of your portfolio you want to tie to Tesla’s business performance. Experts suggest limiting exposure to individual stocks like Tesla to a maximum of 5% of your total portfolio.
- Financial Goals: Make sure your investment doesn’t interfere with your monthly expenses, emergency funds, and retirement savings. At the top of your priority list should be an emergency fund. Experts suggest aiming for three to six months’ worth of expenses.
- Budget: If you can’t afford a whole Tesla share, you might consider buying a fractional share, which is a portion of a share. Many brokers now provide the option to purchase fractional shares of individual stocks.
- Investment Strategy: Decide between lump-sum purchase or regular investments using dollar-cost averaging. Dollar-cost averaging can lower investment risk but may not lead to outsized returns.
Lastly, think about when you’ll need the money for your Tesla investment. In general, stock market investments should have a time frame of five years or more. So, view Tesla as a long-term investment and only use money that you won’t need in the near future.
Step 4: Place Your Order
With your research complete, it’s time to buy Tesla stock. Here’s how:
- Access your brokerage account online or through the broker’s mobile app.
- Tesla’s ticker symbol is TSLA. Enter this symbol to locate the stock.
- Decide the number of Tesla shares you want to purchase or the dollar amount you intend to invest.
- You can opt for a simple market order, which buys Tesla shares at the current market price. Alternatively, consider more sophisticated order types like limit or stop orders, which allow you to set specific price thresholds for buying.
Remember that Tesla is traded on the Nasdaq exchange, and trading hours are typically from 9:30 a.m. to 4:00 p.m. ET. If your brokerage offers pre-market and after-market trading, you can place orders during extended hours.
Step 5: Monitor Your Investment
To effectively manage your investments, set up a routine to review your portfolio’s performance:
- Schedule regular check-ins, whether monthly, quarterly, or annually, to ensure the company continues moving in a positive direction.
- Compare Tesla’s performance to broader market benchmarks like the S&P 500 and Nasdaq Composite Index to gauge how it fares in the broader market context.
- Watch Tesla’s financial data in its public filings to assess how the company handles its finances over time.
How to Sell Tesla Stock
When the time comes to sell your Tesla stock, follow these steps:
- Log in to your brokerage account.
- Enter the number of Tesla shares you wish to sell or the dollar value you want to receive.
- Similar to buying, you can select market orders for immediate execution at the current price or use other order types depending on your selling strategy.
- If you sell Tesla shares at a profit (capital gains), be prepared to pay taxes unless they are held in a tax-advantaged account. The amount of capital gains tax you owe may vary based on how long you held the shares. You might consult with a financial professional to understand the tax implications.
Other Investment Options
Investing solely in individual stocks like Tesla can be risky due to stock price volatility. Here are alternative investment options that allow you to invest in Tesla while managing risk:
1. Index Funds: Consider investing in index funds that track broader market indices like the S&P 500 or Nasdaq. These funds include a diversified basket of stocks, including Tesla. By investing in an index fund, you indirectly own Tesla shares along with a mix of other stocks, reducing the impact of Tesla’s price swings on your portfolio.
2. Exchange-Traded Funds (ETFs): ETFs are similar to index funds but trade like individual stocks. Some ETFs focus on clean energy or technology sectors, which often include Tesla as a significant holding. This approach provides diversification and exposure to Tesla within a single investment.
3. Mutual Funds: Look for mutual funds with a focus on electric vehicles, sustainable energy, or technology sectors. These funds may include Tesla in their portfolio, offering diversification and professional management.
Learn more: Best Investment Options
