Tesla is one of the hottest car manufacturers lately, and they are on the cutting edge of electric car technology. Not only are they one of the leading manufacturers of fully electric vehicles, but many consider the CEO Elon Musk to be an incredibly savvy businessman and genius-level innovator. This has led many people to want to buy Tesla stock for their investment portfolio, but some are left wondering just where and how to buy Tesla stock.
Tesla Inc. does not offer equities shares or stock sales directly. To buy Tesla stock, you must have an account with a brokerage firm. There are many platforms that will allow you to buy Tesla stock without charging transaction or trade fees, like Schwab, Fidelity, and even Robinhood.
While it may seem simple enough to set up a brokerage account on one or more trading platforms, there is still a lot to consider. You should take into account several factors first, such as your risk tolerance, the company fundamentals, the inherent volatility of the stock market, and even hedging potential risk by investing in a fund that Tesla is part of. We're going to dive into where and how you can buy Tesla stock and much more.
Invest In Tesla
Tesla has had some very large swings in its value recently, which has not only caused it to make news but has caused a run on buying the stock. Many people take advantage of the dropping price of a company's stock as an opportunity to "buy the dip" since they feel the fundamentals are enough to cause the price to come back up. To these investors, a drop in Tesla's stock price just means it's on sale, and it's time to add more to their portfolio. If you want to buy Tesla stock, here's how you can do it.
Open A Brokerage Account
If you don't already have an investment portfolio with a brokerage, opening an account will need to be your first step. This will only take a few minutes and can even be done entirely online or via a smartphone app in many cases. You'll need to provide some personal information and answer a few questions, just like opening a new bank account, but in most cases, your account will be up and running in less than 10 minutes. Some of the most popular investment platforms are largely fee-free and offer free trades, such as Robinhood, WeBull, Fidelity, and more. If you have a 401(k) through your job, you can even use that.
Make Sure The Fundamentals Are Solid
One of the things few investors do when they get wind of a new stock they want to buy is deeply investigate the fundamentals of the organization. Always do your research before getting into any new investment, whether it's a stock, ETF, or any other investment instrument.
You'll want to take a look at the company's recent balance sheets and income statements, along with a solid examination of the competition. Be sure you look into the management, institutional ownership, and other key information. Check the short interest on the stock. It also never hurts to look at what other analysts are saying about the company as well, and if they are bullish or bearish on it, but be sure you take the opinion of others with a grain of salt.
Be Sure Tesla Is A Good Fit For Your Portfolio
If you're just starting and Tesla will be your first, or one of your first, investments, then this won't matter as much. However, it's always good to remember that stocks are highly volatile, and with portfolios that aren't highly diversified you may experience a significant loss of value in short periods. If you have the money, make sure you offset the potential risk of Tesla stock with other investments of a far lower risk level, like ETFs, bonds, or even CDs.
Not only should the types of your investments be varied, but the companies' locations should also have some variance. For instance, don't only invest in companies on the east coast or only in the midwest. Companies from different regions often weather the market differently.
Set A Firm Investment Budget
Make sure you aren't putting all of your investment eggs in one basket, so to speak. If you have a specific investment budget per month, for example, make sure that your Tesla investment buys only take a portion of that. You should keep a diversified portfolio, but your investment purchases should be diversified as well.
Once you know what you can afford to invest and how you're going to spend it, stick to that plan. Don't overextend yourself, or you could face a significant reduction in liquidity. If the stock tanks, you may also lose a large portion of your initial investment value, so be prepared to sit on investment for a while if it isn't doing too well and you don't have stop-loss sell orders placed.
Time Your Buy
Knowing when to buy is also known as your entry strategy, and you can set a buy order to coincide with your strategy. You can have a market order that executes immediately, at whatever the current market price is. You can also set a limit order, which allows you to set a price, and if the stock lowers to that price, it executes the order, which is great for keeping buy orders under budget. You can also add a little at a time by buying fractional shares consistently over time, which can also help your cost basis.
Always Have An Exit Strategy
Know when enough is enough. If you buy Tesla stock, you're not going to hold it forever, so make a plan on what conditions you'll want to sell under. Set a stop-loss order to sell if the price drops too much, too quickly. Set a limit sell to sell a stock or two and realize those gains if it hits high numbers. Know what your goals are, and act accordingly.
How To Buy Tesla Stock Directly
The Tesla company does not offer any options for direct stock purchase. If you would like to add Tesla stock to your portfolio, you will need to arrange an equities purchase through a private broker or brokerage platform. There are many options for brokerages, and many offer free trades facilitated by payment for order flow. Many offer the ability to open an account in just a few minutes.
How Much To Buy Tesla Stock
This can be a tricky subject, particularly since the market moves so quickly and with a significant amount of volatility. At the time of writing, the price of TSLA was approximately $760 per share, and the forecast for the next 12 months has an incredible amount of variance and potential risk. An aggregate of 35 analysts creates a 12-month price forecast for Tesla Inc. that has a median price expectation of $1,035, and while the forecasted 12-month high is as much as $1,620, the potential low is forecasted to be as little as $250.
Before you consider buying Tesla stock, be sure you have a firm budget in place to avoid overspending, and always consider your investments in the context of your risk tolerance. If your risk tolerance is on the low side, you may only want to invest periodically in fractional shares, while those with enough capital and high enough risk may consider buying several shares at once with the right entry price.
An Alternative Tesla Investment Strategy
For those who want to invest in Tesla Inc. but can't or won't either due to the price of the shares themselves or the potential risk involved in a stock that's seen such significant fluctuations in value recently, there are alternatives. One of the most popular is to leverage an exchange-traded fund, or ETF, that has TSLA holdings.
These are funds that are made up of many different companies, generally from a particular sector, such as tech or automotive. They hold large amounts of shares of similar companies and use that diversification to hedge against significant loss in value. The best part is that ETFs are managed by some of the best and most profitable investment firms globally and will rarely lose value unless the market has a significant correction.
There are nearly 300 ETFs that have Tesla holdings, but some are much more popular and profitable than others. Some of the ETFs with the largest TSLA holdings include the SPDR S&P 500 ETF Trust (SPY), Invesco QQQ Trust (QQQ), and iShares Core S&P 500 ETF (IVV). ETFs with TSLA holdings that have the largest returns include Goldman Sachs MarketBeta U.S. 1000 Equity ETF (GUSA), Neuberger Berman Disrupters ETF (NBDS), and SPDR MSCI USA Climate Paris Aligned ETF (NZUS).
Understanding How To Buy Tesla Stock Can Diversify Your Investment Portfolio
There are a lot of investment strategies that can result in you adding a robust amount of Tesla stock to your portfolio. Understanding the best way to invest, along with planning out an appropriate entry and exit strategy to protect your principal investment, can lead to your portfolio experiencing significant gains. Remember to budget for your investment accordingly, never invest more than you're willing to lose, and always work within your risk tolerance.
Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.