Whether they admire Elon Musk or simply enjoy the look and performance of his company’s cars, Tesla fans are devoted. It’s not hard to see why: From vehicles that have a bioweapon defense mode to solar roofs, Tesla (TSLA) is an industry disrupter on a massive scale.
That’s led to some impressive investment returns. According to its latest earnings report, Tesla’s revenues were up a whopping 80% year over year. If all of that makes you want in on Tesla’s electrifying growth, here’s everything you need to know to buy TSLA stock.
How to Buy Tesla (TSLA) Stock
1. Open a Brokerage Account
Opening a brokerage account is your key to buying and selling securities, like stocks, mutual funds and exchange-traded funds (ETFs). A brokerage is more than just your ticket to ride TSLA to the moon, though. It also has all the research and education you need to be a successful investor as well as different types of investment accounts designed for particular goals.
If you’re investing for retirement, go with a tax-advantaged individual retirement account (IRA). This type of account gets tax breaks from Uncle Sam that can help your money grow even faster.
If you want more flexibility with your investment account—say you want to save for a Telsa of your own in the next few years—you probably want a taxable brokerage account. These let you invest for any purpose or time frame, though you’ll have to pay taxes each time you sell an investment for a gain or receive dividend income.
All brokerages are not created equal, so you’ll want to be sure to compare the fees, available investments and services offered by at least a few to determine which is right for you. You can also peruse our picks for the best online brokers.
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2. Decide How Much to Invest
You probably aren’t able to sign over your whole paycheck to Elon Musk. That means you’ll have to ask yourself a few questions to figure out how much you can afford to invest in TSLA.
- What’s your budget? After you’ve paid all your expenses for the month, you’re free to save and invest whatever you have left. Ideally, you’re socking at least some of that into an emergency fund, if you don’t already have one, as well as retirement savings. But the rest you can put toward other investments, like Tesla.
- What’s TSLA’s current price? Stock prices are always fluctuating, but Tesla’s stock price has been more than $400 a share for the past year. Because of that, you may not be able to buy a whole share of TSLA yet. Luckily, some brokerages, like Charles Schwab, Robinhood, Fidelity and Stash, let you buy portions of stocks called fractional shares.
- What’s your investing strategy? Most people choose to invest one of two main ways: with a large lump sum all at once or with small amounts over time. This latter method, called dollar-cost averaging, may decrease your risk and help you pay on average less per share over time.
- What about your other investments? If you’re investing already, you want to make sure you think about how Tesla fits in your portfolio. “Any individual stock purchase should play a relatively minor role in the portfolio of the average investor,” said Chip Workman, a certified financial planner (CFP) with The Asset Advisory Group. “A good rule of thumb is that no individual stock should make up more than 5% of a portfolio.”
3. Review Tesla’s Performance and Potential
Before buying Tesla stock—or any stock—it’s wise to do some research into the company’s financials, performance and future outlook. The easiest place to get started is through a company’s annual reports (Form 10-K) and quarterly reports (Form 10-Q). Public companies like TSLA are required to publicize detailed information about their financial health in these.
You can find these on Tesla’s investor relations site or by searching the Securities and Exchange Commission’s (SEC) database.
You may also turn to experts for their input. Brokerage companies frequently put out commentary on major stocks and industries, and third-party evaluators like Morningstar provide comprehensive analysis.
When you combine financial data with expert insight, you’ll be able to decide how much of your money you want to put into Tesla.
4. Decide Your Order Type and Place It
Once you’ve decided how much you want to invest in Tesla, you can buy your first shares. You’ll need to log into your brokerage account and enter Tesla’s ticker symbol (TSLA) and the number of shares you want to buy or the dollar amount you want to invest.
You can use a simple market order to buy shares at their current price, or you can try a more sophisticated order type, like limit or stop, to purchase TSLA only if its price falls below a certain threshold.
Because Tesla is traded on the Nasdaq exchange, you can buy it Monday through Friday from 9:30 a.m. until 4:00 p.m. ET. If your brokerage provides access to pre-market and after-market trading, you can continue to place orders for a few hours before or after the market is open. Any orders received outside of hours you can trade during will be placed as soon as the exchange opens again.
5. Evaluate Your Investment
Whether you invest in Tesla or other securities, it’s a good idea to periodically check in on their performance.
It’s probably easiest to start with annualized percent return. This way, you can compare how well TSLA performed over a year compared to other companies or investments. You can also revisit Tesla’s financial information to make sure it’s still moving in a positive direction.
Outside of comparing TSLA’s performance to that of other stocks, you may also want to measure it against industry benchmarks, like the S&P 500 and Nasdaq Composite Index. This will tell you how Tesla is performing compared to the market overall.
How to Sell Tesla Stock
When you’re ready to sell your Tesla stock, go to your brokerage’s trading platform and enter the number of shares or the dollar value you want to sell. You’ll also get to pick an order type here depending on if you want to sell at the current price or hold out for a particular one.
If you sell your shares for more than you paid and make a profit—known as capital gains—you will likely owe taxes, unless you’re selling shares held in a tax-advantaged account.
These capital gains taxes can vary based on how long you hold your TSLA shares. If you’ll be realizing large capital gains on your Tesla investment, it may make sense to talk to a financial professional about the impact the sale will have on your income taxes.
How to Invest in Tesla With Index Funds
Tesla (or any single stock, for that matter) can be a very volatile investment.
You can lower the risk you see extreme highs and lows by diversifying your investment holdings. An index fund, for instance, contains hundreds or thousands of individual stocks and is the “easiest way to diversify your portfolio,” according to Valerie Rivera, a certified financial planner (CFP).
TSLA currently makes up about 1.5% of the S&P 500, meaning 1.5% of each dollar you invest in an S&P 500 index fund goes to Tesla. If you want an index with even larger TSLA representation, you might consider investing in a Nasdaq index fund, where Tesla accounts for almost 4% of holdings.
If you’re unsure whether to invest in individual stocks or investment funds, aren’t sure how much you can afford to invest or don’t know what investment strategy to use, meet with a financial advisor for personalized guidance.
