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Without having the background knowledge and experience, investing can be a daunting task.
In reality, all it takes is just four simple steps to begin your investing journey.
Understanding how to invest your money can help you grow your wealth and achieve greater financial freedom.
1. Choose one of the many investment platforms available to Canadians.
2. Open an account on the platform and deposit funds into your account.
3. Decide on which company you want to invest in (in this case it’s Tesla) and look them up on the platform.
4. Purchase your desired number of shares of the company of your choice.
These steps are fairly high level, so let’s break it down further.
One of the most popular stocks recently has been Tesla.
The company has seen their stock price rise drastically over the past few years, and many new investors are attracted due to their familiarity with the brand and the product.
1. Choose an Investment Platform
The first step in buying Tesla stock is to choose an investment platform.
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As an individual, the easiest way to participate in the stock market is through one of these platforms.
In Canada, there are several choices, with each of them offering slightly different pricing, services, and products.
These companies all have online and mobile applications that allow you to buy, sell, and hold stocks. It is important to do research on all of your options to determine which platform best meets your needs.
These platforms offer several options that cater to different types of investors.
Each of the platforms will usually offer different options on their website such as robo investing, managed portfolios, and self directed investing.
Through these options, you can choose to either have computer algorithms decide where to invest your money (robo investing), have a financial advisor make decisions for you (managed portfolio), or choose to invest on your own (self directed).
Another decision you will need to make is the type of account you want to use when investing.
Most Canadian investment platforms will usually offer the choice of investing in registered or non-registered accounts.
Buying and selling stocks in a registered account is a common strategy, as there are usually tax benefits associated with them.
When you make profits trading stocks in a registered account such as an RRSP or TFSA, these gains can be protected from taxes.
Both registered and non-registered accounts can be opened directly through most online platforms with just a few pieces of identification.
2. Open an Account and Deposit Funds
After you open an account, the next step will be to deposit money so that you can start trading.
Transferring money into your trading account from your bank account can be done in several ways.
For example, a deposit from your bank account can be done through your debit card, bank transfer, direct debit, e-transfer, pre-authorized deposit, Interac online, wire transfer, bank draft, certified cheque, or a variety of other methods.
Each investment platform has slightly different choices, and these will be laid out clearly when you are setting up your account for the first time
After the initial deposit, you may also want to continue periodically adding money into your account. To do this, you can set up an auto-deposit. This allows you to add a predetermined amount of money into your investment account on a predetermined date, ensuring you are saving throughout the year.
3. Search for Tesla Stock on Your Platform
Now that you have chosen an investment platform, opened an account, and deposited funds, it is almost time to begin buying your Tesla stock.
To do this, open up the investment platform on either the online or mobile applications.
Depending on the platform, you will see something slightly different on the main screen.
Each platform should have the ability to search for specific stocks.
Rather than typing in the company name, you will need to search for the company by their ticker.
These tickers range from 1-4 letters and are unique, making it easier for traders to quickly identify companies.
For Tesla, typing the ticker TSLA into the search bar will bring up a screen that shows information about the company.
This screen will contain information such as current price, company news and information, earnings reports, trading volume, and price to earnings ratios.
For investors, the information contained on the trading screen is used to quickly analyze the company.
To increase the chances that you are buying a stock that will go up and earn you profits, research and analysis should be conducted using this and other information before you decide to buy stock.
For example, when looking at Tesla, you see information on the trading screen about their 2021 second quarter earnings report.
Looking at this information, you may see that they beat expectations and posted record revenues.
This may give investors confidence that the company is heading in the right direction, making the investment safer and more likely to be profitable.
Also included on this page will be information such as share price and market cap.
The share price is how much one share of the company is currently being traded for at that given moment.
The price changes every second, and is based on the rules of supply and demand. If there are more buyers (bidders) than sellers (askers), the prices will go up, and the inverse is true as well.
Share price is not the only important metric to look at.
The market cap of the company will likely be shown as well.
This number refers to the total value of the company (number of shares X price per share).
It’s important to note that having a higher share price does not necessarily mean that the company is overpriced or more valuable.
For example, imagine two companies: one that has 100 total shares trading at $20 a share and another with 50 total shares trading at $40 a share.
While the latter company may seem more expensive and valuable, they both have a market cap of $2,000.
Once you have found TSLA, you are almost ready to make your first investment.
Another question you must ask yourself is how much money you want to invest.
At the time of writing, Tesla currently trades for around $700 a share.
A question you may ask is “can I invest in Tesla if I don’t have $700?
In fact, there are several ways of investing in the company even if you do not have enough to purchase one share.
The first option is to purchase a fractional share. As the name suggests, this option allows traders to buy less than one full share.
Not every investment platform has this option, so doing research beforehand is important.
Another option is to purchase an exchange-traded fund, or ETF.
These funds usually contain a basket of different stocks bundled together.
For example, one of the most widely traded ETFs is SPY, which is a basket of the 500 largest publicly traded U.S. companies (also known as the S&P 500).
As Tesla is a part of the S&P 500, purchasing a share of SPY means that you are also purchasing a small part of Tesla as well.
SPY has a lower share price, providing an opportunity for more investors to gain ownership of Tesla shares without needing to invest too much money.
However, TSLA going up will only marginally impact the price of SPY, as the ETF performance is also dictated by the 499 other companies in the S&P 500 as well.
Investing in ETFs can give you broader exposure to multiple companies, but also reduces the upside that can be gained when investing in fewer companies.
4. Purchase Your Desired Quantity of Tesla Shares
The final step will be deciding what type of order you want to use.
The most common is a market order.
Market orders will simply fill at the current market price, guaranteeing the purchase.
Another option is to place a limit order, which executes trades if the stock reaches a specific price.
For example, if you think TSLA stock is going to drop from $700 to $650, you can set a buy order to $650, which means the trade will not execute until the price drops to $650.
Conducting research into the company is one of the most important steps of investing.
Understanding how the company operates and what the future outlook will be can be the difference between seeing a negative or positive return on investment.
Putting money into companies that have no solid business plan or track record of success is a surefire way to lose your investments.
To continue on with our example, we can see what kind of information would be useful to deciding if Tesla is a worthwhile investment.
Tesla Company Overview
Founded in 2003, Tesla was named after famous electrical engineer Nikola Tesla.
While Elon Musk is currently one of the most well known CEOs in the world, he was not actually part of the company until 2003.
The company was founded by Martin Eberhard and Marc Tarpenning, two entrepreneurs who envisioned a car company that was also a technology company.
The company invested heavily in electric vehicle technology.
Research and development to develop their first product, the Tesla Roadster, took many years and millions of dollars.
It was not until 2008 that the company began producing and delivering the cars.
Since then, the company has added several other models to their lineup, with the Model S, Model 3, Model X and Model Y all becoming massively popular.
Traditional car manufacturers have been slow to catch up, and as a result Tesla has enjoyed a period of rapid growth over the past decade.
Aside from Tesla, the main competitors in the electric vehicle sector are Volkswagen, Renault, and Audi.
While Tesla dominates in the North American market, Europe and Asia are all seeing increased competition from other brands.
By 2022, an additional 450 electric vehicle car models are estimated to be unveiled across all car manufacturers.
Tesla Historical Share Price Performance
Due to Tesla’s run of success, the company has seen their stock rise significantly over the past two years.
At the end of 2019, the stock was trading at roughly $400.
At its peak in June of 2020, the stock was trading at four times that amount, briefly reaching over $1,400.
The price now sits at around $700.
At first glance, it may appear that Tesla stock dropped by over 50 percent since June 2020, but this is not the case.
The company decided to split their stock, giving 5 shares of Tesla for every 1 share owned before the split.
This was done because the price of the stock was getting too high.
As mentioned before, high prices prevent investment from those who have less money.
Just like fractional shares and ETFs, share splitting is another way to allow more investors to invest in the company at a lower per share cost.
However, it is important to understand that stock splits do not change the company’s evaluation.