How to Buy Tesla Stock

Investors who want to buy Tesla stock should follow a few simple steps before hitting the buy button.

Dayana YochimJune 15, 2020

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Tesla Inc. (which trades under the symbol TSLA) is a car company, but if you want to buy Tesla stock, it helps to be comfortable with roller coasters.

That’s because wild up-and-down share price swings have become a hallmark of the stock’s performance. But maybe the opportunity to buy Tesla stock during one of its price dips is what piques your interest.

Whether you're buying a dip, looking to add the electric car industry to your portfolio or have an admiration for Elon Musk, Tesla's mercurial CEO, here's how to buy Tesla stock.

1. Get ready to buy Tesla stock

If you don’t already have a brokerage account, you’ll need one to buy Tesla stock. In general, you’ll want a brokerage account with low or no trading commissions, useful tools and an account minimum you can manage. See the best brokers for stock trading or use our brokerage comparison tool to find the best account for you. (Article continues below tool.) 

Worth noting: If you’re buying Tesla shares for retirement because you believe in the company’s long-term potential, a Roth IRA could be a good parking spot. That’s because qualified withdrawals from a Roth are tax-free, so you won’t be responsible for paying Uncle Sam for investment gains (like with a traditional IRA), which could be substantial with a potentially fast-growing company like Tesla.

If this is all new to you, here is what you’ll need to know to open a brokerage account.

2. Research Tesla and its stock

Before you load up the trunk with Tesla shares, pop open the hood and see what you’re really getting into. Remember, when you buy a stock, you’re purchasing a small portion of an actual business, not just hitching a ride on a cult of personality.

Tesla's balance sheet, income statement, competition and management (all explained in our guide on how to research stocks) will help you give the company a good once-over.

You can access research, analyst ratings and other key information about Tesla via your brokerage account. In our analysis, Merrill Edge and E-Trade stand out for their extensive and free research offerings.

If you like what you see, your next step is to get ready to buy when the time is right.

3. Decide when to buy Tesla stock

When a company’s share price is somewhat unpredictable, it can be hard to know when to step on the gas and go forward with purchasing shares. The good news is that you have options. They are:

  • Buy Tesla stock right now: When you're ready to buy Tesla stock in your brokerage account, you'll be given the option to choose between a market order and a limit order. A market order places the trade right away. It will be executed at the best possible price at the time of your trade. The potential downside is that with a fast-moving stock like Tesla, by the time your order goes through, you could end up paying more (or less!) than what you were quoted.

  • Buy Tesla stock at a specific share price: A limit order allows you to set the price you’re willing to pay and only takes place if the stock reaches that price or lower. It’s a good way to ensure some predictability in what you pay. A possible downside: Your order may not be fully executed, or even fulfilled at all, if Tesla’s price swings so wildly that enough shares don’t become available before the order expires.

  • Buy Tesla stock systematically over time: Dollar-cost averaging takes some of the fear and guesswork out of deciding the best time to buy Tesla stock. Instead of buying all the shares you want in a single purchase, you spread out your trades and buy shares at regular intervals over time (days, months and even years). You can schedule these purchases based on price with a stop-loss or stop-limit order, as explained in more depth in our full guide to how to buy stocks.

4. Decide how many shares to buy

This is partially dictated by how much money you have to invest. But you should also think about how much of your portfolio you want to tie to Tesla’s business performance. This is the “don’t put all of your eggs in one basket” rule of investing.

If you don’t have a diversified portfolio yet, the easiest way to get there is by investing in mutual funds rather than individual stocks. Funds essentially bundle stocks together to lessen the chances that you’ll lose your entire investment if a single company tanks. (Here’s how to invest in index funds, many of which, conveniently enough, contain Tesla stock.) Once you have a diverse portfolio in place, you can consider adding shares of individual stocks to it.

What if you don’t have enough to buy an entire share of Tesla? You may be able to purchase a fractional share — essentially a piece of a share — from a broker that offers these, such as Robinhood.

5. Be a smart Tesla shareholder

Once you buy a stock, your job as a shareholder isn’t over. It’s on you to keep an eye on the company to determine if at any point the stock is no longer a good investment.

Here’s more on how to pick the right stock investments for any given point in your life.

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