How To Buy Tesla (TSLA) Stock

Steps to Invest in Tesla (TSLA) Stock

1. Open a Brokerage Account

A brokerage account is essential for buying and selling stocks, mutual funds, and ETFs, including Tesla (TSLA). A brokerage offers more than just access to trading—it also provides resources and education for effective investing, with account options tailored to specific goals.

In Canada, TSLA stock can be purchased through registered accounts, such as Tax-Free Savings Accounts (TFSAs), Registered Education Savings Plans (RESPs), or Registered Disability Savings Plans (RDSPs). These tax-advantaged accounts allow for growth without immediate tax implications. For greater flexibility, such as saving for a short-term goal, a taxable brokerage account may be more appropriate, although taxes are incurred when selling investments or receiving dividends.

It’s important to compare brokers by considering fees, available investments, and services. The broker will handle the necessary paperwork for purchasing U.S. stocks like TSLA.

2. Determine How Much to Invest

Before deciding how much to invest in Tesla, consider the following:

• Budget: After covering regular expenses and setting aside savings for emergencies and retirement, remaining funds can be allocated to other investments like Tesla.
• TSLA Stock Price: Stock prices fluctuate, and Tesla's recent 52-week high was around $400 (CAD). If full shares are too expensive, some Canadian brokerages, such as WealthSimple and Interactive Brokers, offer fractional shares, allowing investment in portions of a stock.
• Investment Strategy: Investing a lump sum all at once or gradually through dollar-cost averaging are common strategies. Dollar-cost averaging can help reduce risk by spreading purchases over time.
• Portfolio Diversification: Consider how Tesla fits into an overall portfolio. For a balanced approach, it's advised that individual stocks make up a smaller portion of a diversified portfolio.

3. Review Tesla’s Performance and Prospects

Before making any investment, it's important to research the company’s financials and future outlook. Public companies like Tesla provide detailed financial reports (Form 10-K and Form 10-Q), which offer insights into performance and potential.

4. Choose an Order Type and Place the Order

Once a decision has been made about how much to invest, place the order through the brokerage platform. Enter Tesla’s ticker symbol (TSLA) and choose the number of shares or the amount to invest.

There are different order types:

• Market Orders: Purchase shares at the current price.
• Limit or Stop Orders: Set a specific price at which to buy the stock if it falls to that level.

Tesla is traded on the Nasdaq exchange, with trading hours from 9:30 a.m. to 4:00 p.m. ET. Some brokers offer pre-market and after-hours trading.

5. Account for Currency Conversion Fees and Taxes

When buying U.S. stocks from Canada, currency conversion fees apply, usually 1% to 4% above the exchange rate. To reduce these costs, consider using Norbert’s Gambit, which involves converting Canadian shares to U.S. shares through a brokerage, allowing the purchase of U.S. stocks like Tesla without the high conversion fees.

Tax implications also exist. In Canada, capital gains taxes apply to 50% of the profit made from U.S. stocks like TSLA, payable to the CRA.

6. Monitor Your Investment

It’s important to periodically review Tesla's performance. Start by assessing the annualized percent return to compare how TSLA has performed relative to other investments.

Tesla's performance can also be compared against industry benchmarks such as the S&P 500 and Nasdaq Composite Index. This provides a broader view of how Tesla is doing in relation to the market as a whole.

When ready to sell, enter the number of shares or dollar amount to sell on the brokerage platform. Depending on preferences, the sale can be made at the current market price or set for a specific price through order types.

These steps guide a well-informed approach to investing in Tesla, considering financial goals, portfolio balance, and potential returns.