How to buy Tesla Shares: an investment guide

Buying Tesla stock: how to invest

1. Research Tesla shares
2. Open an online share dealing account or download the IG Invest app
3. Decide how much money you want to invest
4. Place your investment

How much will it cost to buy Tesla stock?

As Tesla is a US share that’s listed on the US Tech 100, you’ll need to pay a FX fee when buying it from the UK.

What to consider before buying Tesla shares

Investing in shares carries risk and you could lose more than your initial investment. It’s therefore essential to come up with an investment plan to help manage this risk before you invest in Tesla shares. Here’s a few things to consider:

Know your long— term goals

Setting out clear reasons for investing can help you make key decisions such as the amount you’re looking to put in and how long you intend to hold Tesla shares before potentially taking profit.

Investing comes with risk so it’s essential to consider if you can afford any potential losses.

Know when you’ll need the money

When you buy Tesla shares, your capital grows based on the value of its share price. This can potentially lead to higher returns than cash savings which only increase in value through interest rates.

To maximise returns, shares are usually held for a minimum of 10 years, so it’s important to consider when you’ll need the money. If you think you’ll need it in the next two to three years it may be worth exploring shorter term options like bonds, trading, or savings accounts. If you’re still looking to invest, buying lower risk, more mature stocks are recommended.

Most analysts view Tesla stock as a higher risk investment due to the increased competition in the EV market. Lower priced EV’s developed by Tesla’s competitors may force Tesla to reduce its prices which could negatively impact profit margins. CEO Elon Musk’s controversial political involvement has also negatively impacted investor sentiment.

That said, the technology behind Tesla has the potential to disrupt the EV industry, pioneering new products that drive demand and lead to future gains. Due to the high—risk nature of Tesla shares, it’s a good investment if you’re looking to hold the stock over a long period of time.

Know how much risk you can take

Financial markets are often volatile and there’s always the risk you could lose more than your initial deposit.

Developing a risk management strategy can help you minimise losses if the market turns against you.

Here are some steps you could take:

• Diversify your portfolio by investing in both high and low risk assets across a range of sectors
• Hold Tesla shares for at least 10 years, with the view of gradually building wealth
• Closely monitor the markets
• Keep on track of any macroeconomic events that may influence Tesla’s stock price

How to research Tesla stock as an investment

Fundamental analysis is one of the best ways to research the price performance of Tesla stock. It analyses financial statements and explores external factors that could impact Tesla’s share price. Here are some things to consider before investing in Tesla shares:

P/E ratio

Tesla’s stock value can be measured by looking at its price-to-earnings (P/E) ratio. Essentially, it explains how much you’d have to spend on Tesla shares to make $1 in profit. If a company has a high P/E ratio compared to its competitors, then it could be indicative that its stock is overvalued.

The P/E ratio is calculated by dividing the market value per share by the earnings per share. The earnings per share are calculated by dividing the total company profit by the number of shares it has issued.

Net sales growth

Net sales represent the company’s total revenue after deducting discounts, allowances and returns. It provides an accurate way to assess a company’s actual earnings and accurately review its growth, profitability and overall performance. It’s also important to monitor the performance of different parts of the business.

For instance, analysing the growth of Tesla’s lower margin vehicle sales can provide an indication of market demand, whereas reviewing the profitability of higher margin services like its self —driving features and software can provide a good overview of Tesla’s overall financial health.

Return on equity

Tesla’s return on equity (ROE) measures return on shareholder capital. ROE is expressed as a percentage and can be calculated by dividing a company’s net income by stakeholder equity. A low ROE could be an indicator that a company’s shares are overvalued. This is because, a low ROE would show that Tesla is not generating a lot of income relative to the amount of shareholder investment.

Why buy Tesla shares

Despite growing competition in the EV market, as an electric car company Tesla has successfully made the adoption of EV’s more desirable. Over the years, its luxury brand and innovative business model has helped drive demand.

Unlike other EV manufacturers, Tesla sells its products directly to consumers without them having to go through franchised dealerships. This gives Tesla more control over its sales process and helps create an improved buying experience where customers only interact with Tesla employees, ensuring a more consistent sales experience than dealerships which may have its own incentives and sales goals.

To further increase adoption, the company has developed a network of 60,000 Superchargers worldwide which enables drivers to charge their vehicles in as little as 15 minutes for a quarter of the price of petrol, helping EV’s become easier and cheaper to run.

Tesla continues to be at the forefront of developing new cutting—edge technology and its robo—taxis are the latest example of this. If the adoption of its self—driving car which works within a ride sharing company is successful, it could drive the share price up.

It’s this innovative approach and disruptive business model that has caused many investors to view Tesla as a tech stock, and its share price has often behaved as such. In 2013, Tesla stock surged 382.5%, which is comparable to growth seen by tech giants such as Google and Apple.

Since then, Tesla stock has continued to increase in value. With growing demand for EVs, solar generation systems and batteries, the company’s innovative approach could help increase the accessibility and effectiveness of these product and its share price is likely to rise as a result.

Despite this growth potential, Tesla stock is often volatile and high risk and future gains can’t be guaranteed.

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What to do after you buy Tesla shares

Once you’ve invested in Tesla shares it’s important to actively manage your position via our web platform or the IG Invest app. Staying up to date with the latest news and market trends can help you make smarter investment decisions and acts as a way to mitigate risk during moments of volatility.