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The 9 ‘golden’ rules for Tesla stock investors

The 9 ‘golden’ rules for Tesla stock investors

While Tesla (NASDAQ: TSLA) has been the talk of the town for years and generally the most prominent electric vehicle (EV) maker in the world, its 2024 performance – a performance which earned it the spot among the worst S&P 500 companies of the year – has dampened enthusiasm and confidence.

After a 30.51% decline year-to-date (YTD), voices that have been advocating for Tesla to be valued more as a regular car company, than as a big tech firm started resurfacing, as did some shockingly low 12-month price targets.

Despite this, many are still bullish on TSLA – a reasonable position given the company’s position at the technological cutting edge of the industry, as well as Elon Musk’s talent for marketing – and Finbold decided to analyze 9 ‘golden’ rules for Tesla investors.

Spreading the costs and the risks

Much of the advice is, in fact, centered on the age-old notion of not trying to outsmart the stock market

Indeed, with any attempts to predict the future – even when applying the most extensive technical analysis (TA) – guaranteed to be uncertain, dollar-cost averaging (DCA) is the way to go for most investors.

Such an approach ensures that, on average, one pays a relatively low price in the grand scheme of things provided the stock continues climbing over multiple years – as Tesla has done in the past and as many experts forecast will continue doing.

Keeping a cool head

This advice factors into several others. Mindset, for example, is highly important for investors as it is both difficult and important not to give into fear and instead view bull markets just as positively as bear markets as the latter are, as the author Rober Kiyosaki would put it, opportunities to buy good stocks for cheap.

This is particularly important as, in the short term, the market can be tumultuous as seen with TSLA stock’s many sudden ups and downs – including the one persisting through the first quarter of 2024.

Staying determined and spreading out your investments over the long term does not only apply to buying but also to holding since the stock market has, looking at its entire history, done comparatively little than go up.

Money has, on the other hand, been steadily losing value. 

This has spawned the notion – mostly proven correct – that currency carries significantly more risk in the long term than equity despite appearing immediately safer. 

For example, despite its ups and downs, Tesla Motors shares are more than 13,000% in the green on the all-time chart. On the other hand, you would now need $142 to match the purchasing power of $100 from June 2010 – the time of TSLA’s initial public offering (IPO).

TSLA stock all-time chart. Source: Finbold

The business and the stock are connected, not equivalent

Despite this – and despite aiming to be a long-term investor who practices DCA being valid strategies – it is important not to miss the forest for the trees and keep an eye on the business, not just the stock.

Essentially, while buying cheap shares of strong companies is savvy, investing in damaged companies is not.

Oddly enough, such an approach could serve as just a strong argument in favor of buying Tesla as in favor of avoiding it. 

On the one hand, it is an innovative company that published exceptionally strong delivery figures for 2023 and is working on expanding into the 1 billion-strong Indian market.

On the other hand, Tesla has had a history of quality control issues – a particularly painful point given Boeing’s (NYSE: BA) recent woes – has been lagging behind by many years when it comes to fulfilling certain promises, and the staggering environmental impact of making lithium-ion batteries makes a real dent in the notion Elon Musk’s EV maker is part of a global green transition.

Stick to the plan, but stay adaptable

Finally, Field Marshal Helmuth von Moltke’s famous comment that “no plan survives contact with the enemy” is more than applicable to the stock market and it remains important to keep a cool head.

The fact that the stock might trade with major volatility while maintaining the overall hoped-for uptrend harkens back to the necessity of maintaining a stable mindset and remaining level-headed no matter the temporary bloodbath or the current fear of missing out.

Tesla stock price chart

Whether the current decline is indeed just a temporary bloodbath in an otherwise persistent long-term growth for Tesla or not, it remains without a doubt that the 2024 downturn has, so far, had a significant impact on the company’s valuation.

Indeed, while TSLA shares may be 13,000% in the green since their IPO, they are 10% in the red in the last 52 weeks and 30.51% year-to-date (YTD).

TSLA stock YTD chart. Source: Finbold

Still, the most recent trend gives some room for positivity. On the weekly chart, Tesla stock is 0.20% in the green, and the shares rose 1.80% to $172.63 during the latest full trading day, March 25.

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