There is no doubt that Tesla has been one of the most important shares for enticing people to invest over the last decade. Not only does Tesla represent the potential future of the automotive industry, they are also one of the most followed, discussed, tweeted, bought and sold shares in the world. So, if you want to invest in Tesla shares, this guide will explain the different ways to do it, the costs involved and the potential risks and rewards.
There are three main different ways to buy Tesla shares if you are in the UK and each has different risks attached to them, these are:
- Buy Tesla shares outright
- Buy an ETF with Tesla shares in it
- Trading Tesla in the short term
Buying individual Tesla shares
This is the simplest way to buy Tesla shares. To buy Tesla shares you just need to open an account with a stock broker that offers international investing like Hargreaves Lansdown or Interactive Investor. Both are traditional stock brokers where you can buy shares, funds ETFs, manage your pension, save in ISA accounts and invest in Tesla shares for your long-term future. You can buy Tesla shares with them just as easily as if you were buying a share like Lloyds which is listed on the London Stock Exchange (TESLA are listed on the NASDAQ), although you do have to fill in a couple of extra forms online.
The advantage of using these traditional investment platforms is that both provide lots of analysis, data, are well established and have exceptional customer service. Plus, if you only ever want one investing account you can manage your entire portfolio in one place.
The disadvantage is that if you are a small investor they may be relatively expensive because they charge a commission per trade. They also do not offer fractional investing, so if you want to invest in Tesla you have to buy whole shares which are quite expensive compared to UK shares (for example Lloyds shares are about 45p). The current Tesla price is $741 (it moves around a lot), so to buy one share it will cost you £630 (at today’s GBPUSD exchange rate) plus commission. If you want to buy two shares it will cost you £1,260 and so on, so if you have only a small amount to invest, you may end up putting all your eggs in one basket, which is a terrible investment strategy. A much better way to manage your share portfolio is to diversify and buy smaller amounts of lots of stocks. Investment accounts like Interactive Brokers or eToro will let you invest an amount of money in a company, rather than buy a number of shares. So if only have $500, you can buy $100 worth of five companies to spread your risk.
Buying an ETF with Tesla shares in it
Another way to diversify your risk when buying Tesla shares is to buy an ETF with Tesla shares in it. An ETF is an Exchange Traded Fund traded on the stock exchange that you can buy like any other share, but it contains lots of shares instead of just one (The Consumer Discretionary Select Sector SPDR Fund for example contains Amazon, Tesla, McDonalds, Nike & Starbucks as some of their top ten holdings). These ETFs normal represent a sector or market, for example, electric cars, fintech companies, global growth opportunities or a specific index (a stock market like the NSADAQ)
Three ETFs that contain a large percentage (relative to their overall portfolio are:
|XLY||Consumer Discretionary Select Sector SPDR Fund||17.47%|
|VCR||Vanguard Consumer Discretionary ETF||15.19%|
|FDIS||Fidelity MSCI Consumer Discretionary Index ETF||13.07%|
Trading Tesla derivatives
This option is only for those that know what they are doing and want to take higher risks. Because Tesla is one of the most bought and sold stocks there is a huge amount of short-term trading through derivatives like CFDs, spread betting and options. Avoid trading options if you are in the UK, as they are more of an American product, but CFDs and spread betting do offer some advantages (as well as more risk) over buying Tesla shares and ETFs.
With tesla derivatives you can make money if Telsa shares go down, which they often do following one of Elon Musks Tweets. You can do this by shorting Tesla stock (read our guide to shorting if you don’t know what that is).
Also, if you just want to speculate on the price in the short term it is often cheaper if you are trading small amounts than buy actual shares as the commission is built into the buy and sell price. With a spread betting broker like IG you can bet a certain amount percent Tesla moves in GBP rather than USD so you don’t have to worry about currency conversion costs. Or with a CFD broker through someone like City Index you can trade on leverage to increase your potential returns. This again is only for experienced traders as just as your profits can increase so can your losses.