Five scenarios to sell Tesla’s stock
The most talked about topic and question within the online stock market investment communities is always about one thing and one thing only! Any guesses?
It is about ‘when to sell a stock.’
I can understand why! No one likes to sell a good investment too early. But, more importantly, people would want to avoid the regret of not selling the stocks they own while they had the chance and later see that beautiful green return turns into scorching red decline. It’s a difficult question to answer because the answer is very counter-intuitive.
To be able to decide when to sell, you’d need to know why you invested in the company in the first place. And, if the reasons you bought that stock in the first place are not applicable anymore, you should consider selling. Let’s take Tesla, review five possible reasons you might have invested in the company, and explore when the right time is to sell Tesla’s stock. Firstly, make sure you have a visit to the company’s Stock Card, and then read on!
Scenario one: You invested in Tesla because you like Elon Musk
When do you sell? When you stop liking Elon Musk. I’m not joking. Be honest with yourself. Did you invest in Tesla because you liked Elon’s crazy attitude and dreams? If yes, why are you panicking when the stock price falls 20% after a crazy tweet by Elon?
Scenario two: You invested in Tesla because it has the potential to disrupt the car and energy industry.
When do you sell? After 10–20 years. Industry disruption doesn’t happen overnight, nor in one year or even in three years. It needs time. So don’t check the price every day. Let Elon does his thing, and come back in 10, if not 20 years.
Scenario three: You invested in Tesla because it is a good company!
What? Where have you worked in the past? Really? You think so! I’m not judging! Anyways, when do you sell? Monitor the company’s sales growth, debt level, management stability, ability to raise cash, and things like that on an annual basis. If you see signs of weakness, time to sell. And, you might have already missed the boat! Tesla is not a well-managed company! A quick look at the company’s Stock Card makes it easy to figure out how distracted and chaotic Tesla is.
Scenario four: You invested in Tesla because at some point, the price dropped and you thought it would soon go up!
Fair enough! When do you sell? Set a target in mind (let’s say 10%), set an alert through your brokerage and sell when you hit your target. There is no math here! Tesla’s stock fluctuates based on a myriad of things including what Elon tweets. So, there is no mathematical model to tell you when to sell. Sell when you reach your personal target.
Scenario five: You invested in Tesla and you don’t know why!
Okay, I’m judging you now! When do you sell? Sell as fast as you can, hopefully with no loss! And learn the fact that a reasonable investor first defines why he or she is buying a stock, so that he or she can have a plan for how to manage it!
The bottom line is that the when-to-sell question doesn’t have one answer. Having only one correct response to such questions is counter-intuitive to the existence of the stock market itself. If such was true, everybody would have known the right answer and acted accordingly. The interesting thing about the stock market is that investors are in it because of a variety of reasons. And everyone has a different timeline in mind. Therefore, you cannot really have one response to all of those. When to sell is a personal question and to respond you must go back to why you invested in a stock and evaluate whether such reasons still hold true. It reminds me of a word of wisdom my father shares with me from time to time:
Never buy or invest in anything without knowing when you will be selling.
You should always document the reasons you are investing in a stock so that you can use them to gauge when to sell.