Yahoo Finance See How $80K Invested in Tesla in 2014 Would Let You Retire a Millionaire Today
Even though Tesla’s stock value has had a rough couple of months, dropping almost 30% since the beginning of the year, the electric car manufacturer is still worth 10 times more than it was 10 years ago. As one of the top stocks in the S&P 500, Tesla has driven a good share of the market’s growth in recent years.
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With that in mind, you may have wondered how much would you have needed to invest in Tesla in 2014 to retire a millionaire today. Let’s find out.
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Investing in Tesla a Decade Ago To Be a Millionaire Today
As of closing on May 23, 2024, the price of Tesla’s stock was $173.74. Ten years earlier, at market close on May 23, 2014, Tesla’s stock was trading at $13.82.
So how much would you need to have invested in Tesla 10 years ago to be a millionaire today?
$13.82 / $173.74* $1,000,000 = $79,544.15
This means that if you had invested $79,544.15 in Tesla stock in 2014, you may have been able to sell it today and become a millionaire. Of course, investing all of your money in a single stock would have been incredibly risky — if Tesla had gone under due to unforeseen circumstances, you would have lost all your money instead.
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How Much Money Is Enough To Retire?
When you’re deciding how much money to set aside for retirement, the best thing to do may be to speak to a financial advisor. Everyone’s financial situation may be different, with different sources of income and expenses, so there is no one-size-fits-all solution. Retirees who don’t account for all of their expenses correctly may risk outliving their savings and running out of money.
However, there are a few guidelines you can use to get an idea of how much you should be aiming to save. One of these is the 25-times rule. To get an idea of how much you need for your retirement fund, multiply the amount you’ll likely spend in your first year of retirement by 25.
Is Tesla a Good Retirement-Focused Investment Today?
If you’re debating investing in Tesla as a retirement-focused security today, there are a few points you want to consider before making your decision.
Not Ideal for Conservative Portfolios
If you’re looking to build a conservative retirement portfolio that provides you with a steady income in retirement, you’ll want to invest in bonds and other secure assets so that you don’t have to stress about paying the bills.
“While Tesla has been a high-growth stock historically, its recent volatility and the headwinds it faces, such as increased competition, production challenges, and market saturation, make it a less certain bet for conservative retirement portfolios,” noted Fahad Masood, CEO at FMCA.
Tesla Is Ideal for Risk-takers
When creating a retirement portfolio, everyone has a unique risk tolerance regarding the chances they’re willing to take. If you believe in green energy and have an extended time horizon until retirement, you could possibly benefit from investing in Tesla.
“Tesla seems best suited for risk-taking investors who buy into the narrative that Elon Musk is much smarter than all of the other automobile executives and that Tesla will capture a huge share of the electric vehicle market in the long term,” noted Robert R. Johnson, PhD and Professor at Heider College of Business, Creighton University. “These investors also must believe that Musk’s attention won’t be diverted to any of his other business ventures.”
Tesla’s advancement in Full Self-Driving technology and future EV launches could provide significant growth. However, you’re taking a huge chance on the company by adding it to your portfolio since there are various issues at hand.
You Don’t Want To Rely on One Company for Retirement
When creating your retirement portfolio, you don’t want to rely on just one company to provide enough income to survive.
“I think that Tesla is not a good retirement-focused investment today because retirement-focused investments must be diversified into many sectors rather than a single company,” said Dr. Tenpao Lee, professor emeritus of economics at Niagara University.
Tesla Has Issues To Deal With
Dr. Lee noted how Tesla has issues to deal with in the next little while that could make it challenging to put into a retirement portfolio. Some of these concerns are:
Severe competition from China with much cheaper EVs.
The EV industry has many challenges to overcome, such as battery-related issues in cold weather and the availability of charging stations.
American consumers need more time to accept EVs, and traditional car manufacturers are fighting back with environmentally friendly cars.
Johnson added, “The company’s fundamentals simply don’t justify the atmospheric valuation of the stock. The future of electric cars is the biggest issue going forward with auto stocks.”
As Tesla struggles with these challenges, you don’t want to risk your entire retirement account on what the outcome will be.
Retirement Investing Tips
Focus on stability and long-term growth potential when investing in retirement accounts. Here are a few key considerations when deciding which stocks to add to your retirement portfolio.
You Want to Diversify Your Portfolio
If you’re going to invest in Tesla, you’ll want to balance it with more stable, dividend-paying stocks to mitigate your risks. While there’s nothing wrong with exposure to an industry you believe in, you don’t want to go all in on green energy.
Don’t Get Caught Up In The Hype
While Tesla has been strong at garnering attention, you still want to pay attention to the financials when deciding how to allocate your funds for your golden years.
“My advice to investors is don’t confuse a good product with a good investment,” commented Johnson. “Many investors are drawn to companies that produce products they like and use. Investors often confuse a good product with a good investment opportunity.”
Seek Out Consistent Returns
While looking for stocks to invest in for exceptional returns is exciting, you can’t go wrong with an index fund that tracks a basket of securities. With the S&P 500 finishing 2023 with a 24% return, you could be better off investing in reliable funds. [x]
Johnson concluded, “The bull case for Tesla is predicated on a narrative of Elon Musk being a genius and electric vehicles being the future of transportation. The bottom line is that many investors are swayed by stories and ignore fundamentals.”
While you would’ve experienced a decent return on your investment if you had purchased Tesla stock a decade ago, you can’t ignore the fact that retirement planning is about trying to secure a consistent income in your golden years instead of hoping that one investment pays off.
Chris Ozarowski contributed to the reporting for this article.
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