Financing my CT.......Tesla stock or savings account

[Quicksilver]

I had an interesting conversation with my banker the other day. This is the lady that helped me pay off a big credit card balance and gives me sound financial advice.
I have a thousand dollars a month to save toward the down payment on my CT.
According to my information my truck should be built sometime around 5/26/2023.
Not counting what I have in my savings already that is around 21 months away.
If I put a thousand a month in the bank I will draw .05 percent interest on it.
Tesla stock is around 715 a share which means I would own around 35 shares when I have to pony up my down payment.
Now I realize that the stock price is prob going to increase so I could end up with less stock.
Let's assume when I am ready to sell the average price I paid for share is 900 bucks but the stock is gone up to 1100 a share.
But because the stock price went up I only end up with 29 shares with gives me 31,000 for my down payment.
If I had put the money in my savings account I would end up with 21,000 plus what I have in there now which would end up at 25,000. That's a six grand difference.
So I would ask those of you who are more financially inclined......do I take the safe route and put it in the bank or do I shoot the dice and hope the stock is up enough to give me a lot more down payment.
My banker (who was not well versed in Tesla since she had not done brokerage work in several years) said at my age to play it safe and put it in the savings.
The financial heads on YouTube that I follow say Tesla could be at 2000 a share by 2025.
Any thoughts on the above?

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[Ogre]

If having a set amount of money after XX months is your goal, putting your money into Tesla stock is a bad idea. Even if you accept that owning Tesla long term is the smart thing (I own TSLA FWIW). What happens if next year looks like this year and your ticket is pulled in mid-May?

That's something like a 20% drop... if you had enough saved for your CT3, you are down into CT 2 territory.

I've owned Apple stock for most of 20 years and have watched it drop 30 - 40% for a year at a time twice (and added to my position). If anything, Tesla is even more volatile.

 

[Hunter71294]

You could put some in Tesla and some in a Vanguard or mutual fund that is a little bit more safe. You should get around a 10%-15% yearly return in Vanguard avg.

 

[MEDICALJMP]

One of the big things you are forgetting about is that you are going to be taxed on the capital gain on sale of Tesla stock. Any shares that you buy today and then sell in May 2023 will be taxed at long-term capital gains rates. Anything bought and held less than a year will be taxed much higher short term capital gains. The theoretical accumulated wealth that you would get from having bought and sold Tesla stock until you buy the cyber truck is negated by the fact that you’re going to be paying tax rates of 25% or more when you sell the stock.

Will the tax rates be higher in 2023 than they are today under the Biden administration with their trillions of dollar spending programs. Sooner or later you can’t tax the rich enough to pay for all these programs. You could very well end up having less money from the sale of your stock then you would if you just saved the money and put it into the bank. It’s an interesting question though not quite as easy of an answer as it would seem. I am TSLA stockholder, not planning on selling my small number of shares to help me purchase my truck. I’m saving my money for that day I get the call my truck is ready. My TSLA shares are for the future growth, not a piggy bank.

 

[ajdelange]

Definitely keep this in mind. I bough a share of Tesla stock for $200. It's now worth $700. I'm such a genius at investing! I'm $500 richer. But in fact I am not. The asset side of my balance sheet has gone up $500 it is true but so has the debit side. I owe the Fed and the state a substantial chunk of that $500 in tax.

 

[Dave Lyon]

I have a few rules I use for these types of things.
1) Don't put money in the stock market that you need in less than 5 years. Sometimes the market goes down, and you don't wanna lose your CT because of a downturn.
2) Never invest more than 5% of your net worth in single stocks. Mutual funds are safer (presently my 5% is actually in cryptocurrencies, and the rest of my portfolio is in real estate)
3) Never finance depreciating assets.

I know this is a very conservative approach, but that's how I roll, and it's been very good to me.

 

[fritter63]

Good thread, I'm in the same situation and wondering the same. But with an estimated date of May 2022.......

 

[Ogre]

2) Never invest more than 5% of your net worth in single stocks. Mutual funds are safer (presently my 5% is actually in cryptocurrencies, and the rest of my portfolio is in real estate)

Totally agree with all of your other comments, but not so much this one.

My experience has been you are much better off owning a few stocks you understand and know well then owning a big pile of stocks you can't understand. This is how I ended up owning Apple for 20+ years as a big part of my portfolio. I don't let it get too crazy big, but it's often been more than half my portfolio due mostly to not selling as it's grown.

I have sold Apple shares along the way.. many times and mostly regretted it. One of the best pieces of advice I regret not taking is from Warren Buffet: "Our Favorite Holding Period Is Forever."

Not recommending you buy Apple shares... it's growth curve is mostly behind it. I do recommend holding fewer stocks that you understand well. Just one or two good choices and you will outperform most mutual funds which are generally a giant basket of mediocre.

 

[Ogre]

Borrowing decisions and investing decisions should be made separately. If you can afford to take out a loan (on a car or otherwise) is a decision you should make based on your income security and current debt load and nothing else. Taking on lots of debt so you can invest money is a recipe for bankruptcy.

If the economy hits a speed bump and you get laid off, you suddenly have a portfolio worth a fraction of what you invested and no job to pay your loans off.

 

[John K]

If the money will only sit in a savings account and you will not deplete or reduce the account to an uncomfortable level, you can loan yourself the money, pay off vehicle and pay yourself back with interest so you at least accrue what would be a loan interest rate.

Only mentioning if the money would sit in a fraction of a percentage return account.

I will most likely end up financing 50%.

 

[Dave Lyon]

Just one or two good choices and you will outperform most mutual funds which are generally a giant basket of mediocre.

That's not wrong. They really are a giant basket of mediocre. A good mutual fund would have had some apple in it, and Tesla, and some other great movers, and it would have been drug down by the slow movers.

My father said I should invest in GM. I'm glad I didn't.

The point of mutual funds is to spread out the risk. This does limit the reward, but it makes it much safer to "hold forever", and requires very little time and expertise.

When forecasting, I plan on a 10% return, and mutual funds do very well at being predictable long term.

 

[Quicksilver]

Many thanks to all who chimed in to help me make an informed decision.
I sold my two firetrucks yesterday and ended up with ten grand plus in my savings account.
I opened up an online stock account and put ten thousand in it.
At todays price that will get me 14 shares and leave a little in the account.
I will then put a thousand a month in my savings for the down payment on my CT.
If I put the grand a month in I should have around 20K if Tesla sticks to my projected build date.
At that point I'll either sell the stock and add it to the down payment or hold it and see how high it goes.
I may buy a few extra shares if the budget allows it depending on if it drops again.
Again, thanks for the replies.

 

[Quicksilver]

Update: One week ago I bought my shares at 688 and today they are 711 so I already made money.
I know the price will fluctuate but most of the pundits I follow predict a slow but steady upward trend.

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