Whether he admires Elon Musk or enjoys the look and performance of his company’s cars, Tesla fans are diligent. It’s not hard to see why: from vehicles with bioweapon defense mode to solar roofs, Tesla (TSLA) can disrupt the industry on a large scale.
That led to some impressive investment returns. According to its most recent earnings report, Tesla’s revenues are up 98% year-over-year and its stock is up nearly 80% compared to last year.
If all this is what you want in Tesla’s electrification development, 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 such as stocks, mutual funds and exchange-traded funds (ETFs). The brokerage is more than your ticket to ride the TSLA to the moon. It has all the research and education you need to become a successful investor and also has a wide variety of investment accounts designed for specific goals.
In Canada, you can invest in TSLA stock through any registered account you have. These are tax-advantaged accounts registered with the Canadian government. These include Tax-Free Savings Accounts (TFSA), Registered Education Savings Plans (RESP) and Registered Disability Savings Plans (RDSP). Until the money is withdrawn from the account, or in the case of TFSA, the tax is not required to be paid on any profits made in the registered account.
If you are investing in retirement, you can put any type of investment vehicle, including TSLA stock, into a Registered Retirement Savings Plan (RRSP). You don’t have to pay taxes on it until you extract the money, but the IRS also recognizes Canadian RRSPs, so you don’t have to pay Uncle Sam your US-based TSLA stock until you invest. Remaining in the RRSP.
If you want more flexibility with your investment account – say you want to save for your own Tesla in the next few years – you’ll probably want a tax brokerage account. These allow you to invest for any purpose or time frame, although you have to pay taxes every time you sell an investment for profit or receive a dividend income. Specifically, Canadians have a 15% withholding tax on the IRS and are subject to foreign benefit taxes from the CRA.
Not all brokerages are created equal, so you’ll want to compare the fees, investments, and services offered by at least some of them to determine what suits you best. You can also check our options for the best online brokers. For paperwork that requires you to buy American stock like TSLA, your brokerage will take care of it for you.
2. Decide how much to invest
You probably won’t be able to sign your entire salary to Elon Musk. This means you have to ask yourself a few questions to figure out how much you can invest in TSLA.
- What is your budget? Once you have paid all your expenses for the month, you are free to save and invest all that you have left. Ideally, if you don’t already have one, you’re at least socking up your retirement savings to an emergency fund. But you can put the rest to other investments like Tesla.
- What is TSLA’s current price? Stock prices always fluctuate, but Tesla’s share price is up more than $ 518 ($ 400 USD) per share last year. Because of that, you may not yet be able to buy a full share of TSLA. Fortunately, there are two brokerages in Canada, Wealthsimple and Interactive Brokers, that allow you to buy shares of shares called partial shares.
- What is your investment strategy? Most people choose to invest in one of two main ways: with a large sum at a time or with a small amount over time. This latter method, known as the dollar-cost averaging, reduces your risk and helps you pay less on average per share over time.
- What about your other investments? If you’re already investing, you want to make sure you think about how Tesla fits into your portfolio. “Any individual stock purchase should play a relatively minor role in the average investor’s portfolio,” said Chip Workman, a certified financial planner (CFP) with Asset Advisory Group. “A good rule of thumb is to not have more than 5% of any individual stock portfolio.”
3. Check out Tesla’s performance and potential
Before buying any Tesla stock or any stock it is wise to do some research on the company’s financial, performance and future outlook. The easiest place to start is through the company’s annual reports (Form 10-K) and quarterly reports (Form 10-Q). Public companies like TSLA are required to advertise detailed information about their financial health.
You can find this on Tesla’s Investor Relations site or by searching the Securities and Exchange Commission’s (SEC) database.
You can turn to experts for their input. Brokerage companies frequently comment on major stocks and industries, and third-party appraisers such as Morningstar, Globe Investor and Forbes provide comprehensive analysis.
When you combine financial data with expert insight, you will be able to decide how much you want to put your money into Tesla.
4. Determine the type of your order and place it
Once you have decided how much you want to invest in Tesla, you can buy your first shares. You need to log into your brokerage account and enter the 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, such as a limit or a stop, to buy TSLA, only if its price falls below a certain threshold.
Because Tesla is traded on the Nasdaq Exchange, you can buy it Monday to Friday from 9:30 am to 4:00 pm ET. If your brokerage provides access to pre-market and post-market trading, you can continue to place orders for a few hours before or after opening the market. Any orders received outside of the hours you can trade are placed immediately after the exchange reopens.
5. Keep currency charges and take in mind
If you are buying stock from an American company such as TSLA from Canada, you will need to pay a currency conversion fee to convert your Canadian dollars to US dollars. Conversion fees typically range from 1% to 4% on the exchange rate and apply when converting your money at the time of purchase and when it is converted back to sales. To avoid these fees, you can reserve money to buy American shares in a US dollar bank account.
You can also manage Norbert’s Gambit to save on conversion fees. When you buy a stock or ETF it is an interlist on American and Canadian stock exchanges. You buy Canadian shares of that stock or ETF, then you ask your brokerage to “journal over” your Canadian shares and convert them into American shares of the same stock, then you can sell your American shares in US currency and use US dollars without any US dollars like TSLA without converting them into Canadian dollars The result of buying a stock or ETF.
6. Evaluate your investment
Whether you’re investing in Tesla or other securities, it’s a good idea to periodically review their performance.
It’s probably easier to get started with an annual percentage of income. This way, you can compare how well TSLA has performed in a year compared to other companies or investments. You can review Tesla’s financial information to make sure it is still moving in a positive direction.
Apart from comparing TSLA’s performance to other stocks, you may want to measure it against industry benchmarks such as the S&P 500 and the Nasdaq Composite Index. This will tell you how Tesla is performing compared to the overall market.
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 or dollar value of the shares you want to sell. You can choose the order type here if you want to sell at the current price or hold a specific one.
If you sell your shares for more than you paid and make a profit – known as capital gains, Canadians are generally not subject to capital gains tax payable to the IRS on US stocks or bonds. The US corporation and its corporation derive its original asset value from US real estate, such as mining companies or real estate companies.
This means that if you receive any capital gain from an American stock like TSLA, the taxes (50% real capital gain) from it will be paid to the CRA only in Canada. Other than that, if you happen to make more than $ 5 million USD from your investment, you are subject to estate tax from the IRS.
How to Invest in Tesla with Index Funds
Tesla (or any single stock, for that matter) can be a very volatile investment.
By diversifying your investment holdings you can reduce the risk of seeing extreme highs and lows. For example, the index fund consists of hundreds or thousands of individual stocks and is “an easy way to diversify your portfolio,” said Valerie Rivera, CFP with Fesset Wealth.
TSLA currently accounts for 1.5% of the S&P 500, meaning that 1.5% of every dollar you invest in the S&P 500 Index Fund goes to Tesla. If you still want to index with a larger TSLA representation, you may consider investing in the Nasdaq Index Fund, where Tesla holds approximately 4% of its holdings.
If you are unsure of how to invest in personal stocks or investment funds, are unsure of how much you can invest, or don’t know what investment strategy to use, consult a financial advisor for personal guidance.