September 2020 – Stocks 101

TSLA Five-for-One stock split: Good or Bad?

Elon Musk’s world famous car and clean energy company continues to innovate and design exceptional products and show the world that electric cars are the answer to the future.

Tesla is now valued higher than prominent car brands such as Toyota and Volksvagen and is also valued higher than famous companies such as Coca-Cola and Disney. The market value of Tesla has climbed to a whopping $290 billion making Tesla the highest valued car company in world.

On August 31st, Tesla will be splitting its stock five-for-one to make the stock “more accessible” for many investors and even their own employees. The stock is floating around $1,550 as of August 12th and it has climbed nearly 400% since the Covid-19 pandemic started. A five for one split in this specific scenario would mean that if an investor has 1 share of Tesla valued at $1,500 they would get 5 shares valued at $1,500 meaning that each individual share would be worth $300.

This is exceptional for both current shareholders and future investors who plan to buy the stock after the split. Many people will be buying TSLA causing an inclination for the stock to climb as it would be in any other circumstance. The TSLA stock has been doing exceptionally well this year as they continued to meet deliveries during quarantine and beat quarterly earnings expectations.

Tesla needs to be on every investor’s watchlist in these coming weeks as this is a huge opportunity to make large profits off the stock, especially with this highly volatile market.

What are Stocks?

Stocks are one of the many ways people around the world make large amounts of money everyday. Stocks are how normal people invest in public companies and for those companies stocks are a way to fund products and company growth.

Why Buy Stocks?

When one buys stock in a company they are essentially buying an infinitesimal share in that company. Now, that doesn’t mean they will get to meet Bill Gates at Microsoft’s next shareholder meeting, but they can make a return on investment based on how the company does. There are two basic ways an investor can make money off of stocks: the stock price rises or they get a dividend. Dividends are amounts paid to shareholders, typically every quarter out of the companies income, now not all companies pay dividends but some do.

How do Stocks work?

Companies sell stock in their business to raise money to fund new product lines, initiatives in other spaces, grow their company or pay off debt. To be able to buy shares of a company they need to be a public company which can take place through a process called IPO, initial public offering. Then, the company is available to buy stock in and their initial or starting stock price is based on the valuation of the company just like any other investment. When you buy a stock you are buying it from another investor selling stock and vice versa when you are selling stock. The trading of stocks is handled through a stock exchange such as the NYSE or the New York Stock Exchange. Investors are represented by stock brokers who place the orders for them to buy or sell stock in any given company. Nowadays, many investors have online stockbrokers and they use those platforms to buy and sell on their own.

How long do Investors hold Stocks?

There are many different types of trading which investors like to associate with, but there are two main categories of the stock market: short-term and long-term. Short-term consists of day trading and trading on a weekly basis, this is very volatile (high volume) trading and can be very risky. Long-term trading is what a stock trader can make the most profit in based on the scope of a company but it can be very hard to predict and bet on a company for months if not years with large amounts of money. To learn how to invest click here.