How to invest in Tesla from the UK

About this company

By now, absolutely everyone is aware that the world is moving towards the use of renewable energies and non-polluting mechanisms. And Tesla is the most successful and outstanding company in this transition.

Tesla was founded by Elon Musk, together with two partners, in 2003 with the aim of designing, manufacturing and selling electric cars. It is precisely for the manufacture of high-performance electric vehicles that the company is best known.

However, Tesla also produces parts for electric cars that it sells to other brands, solar panels and batteries that can supply electricity to a house. To this we must add that Tesla's business model encompasses all processes from manufacturing to delivery to the customer.

Therefore, we can find that Tesla, although headquartered in California, has from several huge factories distributed in the United States to its own Tesla dealerships and specialized service centers. In addition to projects already underway in Europe and China.

What can we expect from Tesla in the future?

Being a technology company, Tesla will always go down the path of innovation, constantly improving its existing products and developing new ones. And this behavior can be observed by studying the path taken by the company since its founding.

The first vehicle marketed by the company was the Tesla Roadster, unveiled by the company in 2006. Being its first delivery in 2008 with a value of 109 thousand dollars and with a range of 322 km for a two-seater car.

Since then it has advanced to the model Y, which offers a vehicle with 5 to 7 seats and with a range of up to 480 km at a cost ranging from 39 thousand dollars. This is not to mention the projects that Tesla has underway, with which it promises us great advances.

If you are wondering how it is possible to improve quality and lower costs, the answer is only one: innovation.

Finally, Tesla's progress is also reflected in its stock market price since it made its appearance in 2010 at $17 per share, up to the values we have today. Therefore, Tesla must be taken into consideration when investing.

What kinds of instruments can you trade?

Exchange-Traded Funds

What do you know about Exchange-traded funds or ETFs? They are similar to index funds and are known for combining the benefits of stocks and mutual funds, because they can be exchanged at any moment in the market, but include a much wider diversity of assets and considerably lower rates.

Index Funds

If a long-term investment sounds good to you, and you won't need to take back your money in five years or maybe a decade, index funds can be the best choice. This type of investment is also suitable for beginners since it is safer. Besides, the variety is wider.

Unlike a lot of people think, benchmark returns are very difficult to beat and very few fund managers have done it, apart from some famous cases.

If a fund manager brags about having beaten the benchmark, they probably did it for a short time or on a specific occasion, or perhaps the rates are so high that indexing would be a better decision.

The good thing about index funds is that they perfectly solve both issues: their commissions are minor and they often beat active managers, but in the long term.

What are CFDs?

If you already have been on this broker, you probably realized that the initials CFD appear frequently. We will come back to it, but you should know first that CFDs on this broker are only possible when you are short-selling.

FYI, and if you are considering day trading cryptocurrency or other practices, you will also find terms such as leverage and “going short”.

With CFDs you can operate on this broker even if you are not “in the black” or having a negative balance. In a hypothetical case: you have the certitude that the Tesla will go down, so you clearly think “if it is going to depreciate or go down in price, I'll just wait until it does”. But if it really goes down, it is possible to make some profits out of that.

You can do by “going short”. Its operation, roughly, works like this:

  • You ask someone to lend you, for instance, 100 units of Tesla, which cost $ 5,000 at the moment (obviously, these figures aren't real)
  • You make $ 5,000 by selling the 100 units
  • The Tesla goes from $ 50 to $ 30 (as you presumed, the price decreases)
  • You purchase all 100 units one more time, but now they are worth $ 3,000
  • Now you return the 100 units to whom made the loan
  • The difference is yours, so, you will have earned $ 2000

Keep in mind that it is much simpler than it sounds: we can just say that by trading in Tesla you can also make money if you predict the downs.

How to use leverage in trading

Have you heard the term “leverage”? We'll put it simply: trading allows you to invest higher figures than you can have in a given time. Let's say that you enter with $ 100 and you choose to leverage x2, you will be actually investing $ 200.

Leverage, Take Profit and Stop Loss

Assuming that, for instance, you are positive that Tesla price is going up, and that you have $ 1,000 for “going long”, you should know that you have the option of investing more and making more money.

There's the possibility of requesting a loan, but you must know that all the process takes time, and by the moment you receive the money, Tesla might be already at a much higher price, so you wouldn't be able to invest the way you planned.

Leverage is like a loan, but it is only a few clicks away! You will be able to invest (and earn) much more than what you have on the platform's wallet. As in the image below, you will see the different options you have:

apalancamiento

Trading with other assets allows you to use more leverage. Why? Because leverage is most common in short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. But let's see how leverage works with the previous example:

  • If you decide to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 (remember that$ 1,000 are a “loan” from the broker). 
  • A few days later, Tesla price does rises, as you assumed, and now the cost of your investment is $ 2,400 (20% higher), so you decide to sell back because you want to play it safe. 
  • The $ 1k of leverage will be deducted, and you will have $ 1,400 left; which means the net profit is $ 400, since the other $1,000 was yours initially.

In conclusion, by investing $ 1000 you can make a profit of 40% (in the case you earn $ 400). That is pretty decent.

But watch out: if everything goes ok and the price rises, you will make profits. On the opposite scenario, if the asset decreases, you will also lose more money than you invested.

For example: if instead of increasing by 20%, the price falls by 10%, you won't lose $ 10, but twice (the leverage) that figure, that would be $ 20. For that reason, when using leverage it is very important to take into account Take Profit and Stop Loss.

Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price. 

If you bought Tesla shares at $ 100, you can ask the broker to close once it reaches $ 120. That way, you make sure you won't change your mind and decide to wait a bit longer in case it keeps going up, which could be a mistake.

On the other hand, when using leverage you also have to use Stop Loss, because a small decrease in the price of an asset can lead to a substantial loss. Take into account that your broker will recommend a limit for Stop Loss, but you should set it closer to current price than the platform suggests.