Tesla stocks have continued to fall, declining 13% on Tuesday, a day after the electric auto maker reported vehicle production and delivery numbers for the fourth-quarter of 2022.
The company sold just 405,000 cars during the final three months of 2022, falling short of Wall Street analysts’ estimate of 420,000.
Still, even with such significant losses, Tesla has seen tremendous growth since its inception.
The company first went public in 2010 at $17 per share and hit just over $400 per share at its all-time high in November, 2021. Worth well over $300 billion, Tesla is recognized as one of the most valuable car companies in the world.
How much you’d have if you’d invested $1,000 five years ago
For shareholders who got in on Tesla stock early, these short-term declines don’t erase their long-term gains.
On January 2, 2018, one share of Tesla was trading at $21.37. As of January 3, 2023, one share was trading at $108.10, which is a 405% increase. So if you’d invested $1,000 five years ago, you’d have $4,973 today, which is a $3,973 profit.
Even if you hadn’t invested five years ago and instead you opted to use your stimulus check or postponed student loan payment to invest on May 1, 2020 when share prices hit $46.75, your investment would be up by almost 80% for a total value of $2,270.
Timing the market and trying to get in on a certain stock at the right time isn’t guaranteed to lead to a major fortune. The stock market is wildly unpredictable and there’s no telling how your investments will respond to world events, natural disasters, or economic downturns. Past performance isn’t always indicative of how a certain stock will increase or decrease over time.
What is true is that the longer you’re invested, the more time your money has to grow and work for you thanks to the magic of compound interest.
What to consider before investing in a certain company
If you’re considering investing in Tesla or another company you’re passionate about getting behind there are a few considerations you should make.
- Never invest more than you’re comfortable with. Knowing how much to invest will ultimately depend on how much you’re comfortable tying up in the market and how much you’re okay with losing if things don’t work out in your favor. As a general rule, experts suggest investing between 15% to 25% of your after-tax income. Of course, this will vary from person to person and you should make it a point to reevaluate periodically to make sure this strategy still works for you and adjust if your financial circumstances have changed. “The percentage of that going into stocks is determined by the length of time before the money is needed and tolerance for volatility,” says Paul Peeler, financial advisor at Integrated Financial Group. “The longer the time frame and the higher the tolerance, a higher percentage can go into stocks. And vice-versa.”
- Don’t try to use past performance to dictate future earnings. Just because an investment is doing well or has done well in the past doesn’t mean that you stand to win big in the future. When choosing a stock to invest in, you should do your research and look into a company’s price history, revenue, and projections, but keep in mind that your decision about what to invest in and how much should be based on your risk tolerance, time horizon, and investment goals.
- You don’t have to tie all of your money up in one company’s stock. There are ways to gain exposure to investments in a number of younger companies without putting all of your money behind a certain one. “A globally diversified portfolio of index funds will own some young companies by default, so by that criteria everyone should own some younger companies,” says Peeler. “But very few people should have a substantial portion of their investment mix tied up in direct shares of young companies.”
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