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TSLA Expected Rate of Return

What long-term rate of return do you expect of TSLA? Choose most suitable benchmark.

  • ~ 10%: SPY (SP500 Index) total annual return 10.61% 5-y, 13.84% 10-y

    Votes: 1 2.3%
  • ~ 20%: QQQ (Nasdaq Index) total annual return 19.33% 5-y, 20.45% 10-y

    Votes: 2 4.5%
  • ~ 30%: ARKK (ARK Innovation ETF) total annual return 29.17% 5-y, 26.77% from inception

    Votes: 18 40.9%
  • ~ 40%: TSLA (historical Tesla) total annual return 41.62% 5-y, 54.41% 10-y

    Votes: 23 52.3%

  • Total voters
    44
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You are assuming that when Tesla achieves true autonomy it will be with the current hardware, so that the press of a button uploads it to everyone who pays (or has paid) the price. That might indeed happen. But it is an assumption and we don't know for certain. I personally think it will not be the case. I personally think that the present computer is two generations shy of the needed computing power and that the current sensor suite is inadequate. I also think that the software for it is five to ten years away.

Like any relatively new company that produces such a great product, I expect TSLA to continue to out-perform the market. But also like any company that skyrockets in the years of its early success, the rate of return will eventually settle down. If noting else than because exponential growth is always limited by outside conditions. At some point the other car makers will finally see the writing on the wall and get serious about electric cars and Tesla will finally face real competition and the stock price will reflect that.

Bottom line: Nobody can know what the market will do.
Well duh, nobody knows what the market will do. This thread was started specifically so anyone could offer their best guess. So obviously nothing is "certain" and all statements are based on assumptions. You can't make future predictions without assumptions.

You are correct my second scenario was based on current hardware achieving true autonomy. I very much doubt that happens.
 
But see, that's the thing. I am never going to put that much money into any single stock issue. If I sell some of my TSLA the money would not go into something that I expect to do better; it would go into something I consider to be less risky, which would be mutual funds or small positions in a variety of bond issues. I didn't buy TSLA because I expected it to go way up. I bought it because I wanted to support electric cars. Its very success has created this unexpected dilemma for this risk-averse investor. (I will not sell all my shares. At the most, I'd sell down to my original investment amount.)
Ok, got it. Why not just limit Tesla to a certain fraction of your portfolio? Sell it down to 10%, 5% or whatever exposure seems prudent to you.
 
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Thanks for sharing your math. You arrive at $8100/sh in 2025. Just to probe a bit, would you be willing to pay as much as $2200 this summer in anticipation of $8100 in 2025? That would be just under 30% annual return. Would that still be acceptable return, or would you start considering other investments? How much would be too much to pay for Tesla right now?

Sorry for the late reply - I ignored markets and politics this weekend ;-).

While I really didn't think in terms of buying, my answer would be yes -- I'd probably even pay more than $2200 (and except a lower annualized return) given my expectations for other liquid investments.

Even though my longer-term opinion of TSLA hasn't really changed, I wouldn't have told you that 6 months ago. My thinking on other investment opportunities has changed pretty radically because of what's happened/will happen vis-a-vis the pandemic, the economy, the massive post-March market rally and low interest rates until late in that 5 year window at least.

Stated another way, I don't see that many opportunities to get even 20% annualized returns for the next 5 years -- at least in names I understand. It's possible some of the really big tech players (MSFT, AMZN, AAPL) can get close to that, but it's also possible they'll languish going forward from their current sky-high levels. I'm sure there will be small companies that pull it off -- but risk is a lot higher.

Moreover, to your ARKK (or ARKW) example I'm pretty confident that benchmark indices will underperform active selection for a while -- that was my bias before but it's a stronger conviction now.

However, the reason I don't have as high of hopes for ARKK as TSLA is that I'm less convinced there are enough good ideas these days for ARKK's diversification benefits to outweigh the single stock opportunity of TSLA. I think they'll do well, just not as well as their historical track record.

Finally, I generally view downside risk today as highly correlated. My biggest fear is the economy as a whole -- that tanks TSLA, ARKK and the passive indices. I can protect myself against that with stop losses and cash cushions -- just need to maintain some discipline.

Full disclosure, though, I haven't taken a new long position in TSLA since "funding guaranteed", but I also haven't sold any shares, and it remains an insanely-concentrated position in my portfolio (Charlie Munger would be proud). I dabbled in LEAPs, but leapt (profitably) earlier this year. Overall, I have been building cash to hedge the macro risk. As the macro risk starts to ease, unless TSLA has caused me to retire comfortably and de-risk entirely, I'd likely look for another high conviction idea that stretches out for a longer time frame than TSLA.

One more final thought as I try to convince myself not to buy more. For me and TSLA, I've seen a +50x return over the last 8 years on my earliest positions. It's not analytically correct to think this way, but I do recognize that that's impacting my comfort level with thinking that TSLA can likely achieve a mere 5x return over the next 4 years.
 
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This index ETF is beating the S&P 500 by excluding ‘losers’
Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable
Here is more evidence that passive index investing may be falling behind. XOUT scores the top cap 500 US companies, including Tesla, the lowest scoring 250. The idea seems to be to exclude the dead wood from from the SP500. The results in the first 9 months of the fund indicates a 9 pt lead, 20.46% vs 11.43%.

Tesla could be the secret sauce. Presently it is 1.6% of the fund and has gained 259%. Thus, TSLA alone has contributed about 1.15% points, about 1/8 of the 9% gain over SP500. That is a lot for one stock to contribute, but the scoring methodology seems to be delivering a substantial boost apart from Tesla.

Passive index fund investing is dead. It you look at the excluded 250 stocks, likely that is posting nearly zero appreciation. Their is too much corporate rot out there, that simply get by on inclusion in big index funds and passive investment.

Ironically, a resurgence of active investment would decrease the market cap of corporate dead wood, and this in turn would improve the weighting of indexes like the SP500.
 
You will always be able to find a few actively-managed funds that beat the indexes. But the funds that beat the indexes this year or this decade will not be the ones that beat the indexes the year or decade before or after. Hindsight is 20-20.
 
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But see, that's the thing. I am never going to put that much money into any single stock issue. If I sell some of my TSLA the money would not go into something that I expect to do better; it would go into something I consider to be less risky, which would be mutual funds or small positions in a variety of bond issues. I didn't buy TSLA because I expected it to go way up. I bought it because I wanted to support electric cars. Its very success has created this unexpected dilemma for this risk-averse investor. (I will not sell all my shares. At the most, I'd sell down to my original investment amount.)

I'm more heavily invested in TSLA, but I've got some of the same dynamics at work. Also worth noting that I've been following the company (primarily) and the stock (secondarily) for 8 years, so I feel like I have an information edge on the analysts.

Anyway, I'm getting close to the point where I can cash out - of my TSLA as well as my job, and go sailing off into the sunset (or something like that).


But then I'm faced with a dilemma. I can cash out and leave everything in cash, but that's not a good approach to living in retirement. So then the question arises - what to invest in after cashing in the TSLA shares. H'mm - I consider every other investment to be of lower quality than TSLA, at least as of today. Therefore, the thing to do is to reinvest in TSLA (or just stay invested in the first place of course).

The one exception I would consider today are 1 or more of the ARK ETFs. Something more biotech focused might provide me some diversification while gaining access to a collection of companies and a field that I consider to be equivalently disruptive to Tesla. And all without needing to do my own research to figure out which ones to be in, and which ones to avoid.

I definitely won't go back to an SP 500 index fund (though I do believe there are good reasons for many investors to be in such a thing). For me though, the problem with the SP 500 is that it's more like the SP 50 with 500 company names on the list. It's become so top heavy that the moves in the index are the result of a small # of companies. If/when TSLA is added to the index, it'll be one of the few companies at the top of the index that moves the index (along with many tech companies).

So if what I want to achieve is a broad tech index, then yeah - that'd be a good place for me to go. But as good as that range of tech companies are, I consider all of them to be of lower quality than Tesla. So why buy the nearly good enough stuff, when you can have the best? (These are all my opinions, from which I base my actual investments and portfolio composition - my financial manager thinks I'm hair on fire crazy :D)
 
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Passive index fund investing is dead. It you look at the excluded 250 stocks, likely that is posting nearly zero appreciation. Their is too much corporate rot out there, that simply get by on inclusion in big index funds and passive investment.

I agree with the sentiment - heck, it's at the core of my own investment approach and portfolio composition.

The one disagreement, and it covers a large % of the population, is that many people don't have the inclination, motivation, or whatever to learn about how investing works. Even at the level of figuring out the difference between QQQ and SPY.

For those people, some sort of passive index that is designed to track "the market" (and there must be better market trackers than SP 500) is a good choice. It beats holding cash over the long term, and it keeps their focus on the primary vehicle they have for influencing their personal future - their career and it's advancement.

Even the ARK ETF's represent a relatively high level of learning and energy, if for no other reason - one needs to learn enough to discover that they exist and why/how they separate themselves from the rest of the mutual fund pack (and what the heck is the difference between an ETF and a mutual fund anyway!?!)


There are a LOT of people (I'd say easily the majority, maybe north of 80%, though that's me making up a number to illustrate direction rather than objective and systematic information) in this camp.
 
You will always be able to find a few actively-managed funds that beat the indexes. But the funds that beat the indexes this year or this decade will not be the ones that beat the indexes the year or decade before or after. Hindsight is 20-20.

Broadly true. I agree with @jhm on this one though - disruptive innovation is under priced by the market, and the old dead "safe" companies are over valued. Of course this is also my opinion about what will continue to be true 10, 20, 50 years from now as well; disruptive innovation companies have always been hard to value as early on, they look a lot like companies in the same field that fail at spectacular rates. It's much easier to value companies when they aren't growing all that fast, and they have 'real' financials with real earnings (what's left over there's no more growth / research to invest in). It's always important to look at financial, but when they are your primary source of evaluation, then TSLA has never been worth investing in (might just now be something to consider) as there's no profits to use in evaluating the company. Sort of like AMZN was :)

Anyway, if you agree with the premise that disruptive innovators are under valued (as the creators and operators of the ARK ETF's believe), then that's a good place to invest. More broadly, any mutual fund with a focus on finding and investing heavily in disruptive innovators will serve the purpose of gaining exposure to these types of companies.

If you don't agree with the premise that these companies are a path to systematic improvement to more generalized market indexes, then I happen to agree with you that the current winner is as much happenstance as not. In which case I go with something more passive and focus on the fees I'm paying (minimize fees and track the market = beat many professional analysts / active mutual funds).
 
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I'm more heavily invested in TSLA, but I've got some of the same dynamics at work. Also worth noting that I've been following the company (primarily) and the stock (secondarily) for 8 years, so I feel like I have an information edge on the analysts.

Anyway, I'm getting close to the point where I can cash out - of my TSLA as well as my job, and go sailing off into the sunset (or something like that).

But then I'm faced with a dilemma. I can cash out and leave everything in cash, but that's not a good approach to living in retirement. So then the question arises - what to invest in after cashing in the TSLA shares. <...snip...>

Investing in individual stocks is always risky because of Murphy's Law. Something always goes wrong. And Tesla doesn't pay dividends and Musk has said it never will, at least for the foreseeable future. So if you ever want to benefit from that investment you have to sell some of it.

It's a very personal decision at what point to cash out and enjoy the money, or diversify your risk, or step away from risk entirely and into something relatively secure that will make you no richer but also won't wipe you out. It's also a personal choice when (if at all) to switch from growth to income. If you're retired with no dependents and no kids you want to leave a fortune to, it makes no sense to hold the shares until you die. BTW, there are corporate bonds paying decent interest. And if you diversify sufficiently your risk is pretty low.

It's like buying a computer: If you wait a year you can get a better computer for less money. But by that reasoning you'd never buy a computer. At some point you just have to decide.

I believe that over the long term Tesla will be successful and continue to grow. But I'm at an age where I'm trying to spend my money and have fun with it, not trying to make it grow. I won't sell it all because I still love what the company is doing.

All very personal decisions.
 
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Investing in individual stocks is always risky because of Murphy's Law. Something always goes wrong. And Tesla doesn't pay dividends and Musk has said it never will, at least for the foreseeable future. So if you ever want to benefit from that investment you have to sell some of it.

It's a very personal decision at what point to cash out and enjoy the money, or diversify your risk, or step away from risk entirely and into something relatively secure that will make you no richer but also won't wipe you out. It's also a personal choice when (if at all) to switch from growth to income. If you're retired with no dependents and no kids you want to leave a fortune to, it makes no sense to hold the shares until you die. BTW, there are corporate bonds paying decent interest. And if you diversify sufficiently your risk is pretty low.

It's like buying a computer: If you wait a year you can get a better computer for less money. But by that reasoning you'd never buy a computer. At some point you just have to decide.

I believe that over the long term Tesla will be successful and continue to grow. But I'm at an age where I'm trying to spend my money and have fun with it, not trying to make it grow. I won't sell it all because I still love what the company is doing.

All very personal decisions.

All very true.

And, because it's hard to eat TSLA stock, or pay property taxes, I've begun experimenting with using the stock to sell covered calls (and cash I hold to sell cash secured puts). My focus is on a dividend scale strategy, with early results indicating 1% / month using TSLA call/put sales seeming to be pretty easy to achieve. It's more work than buy and hold a mutual fund, but I find that 'work' fun, and it appears to reward the effort.

And 12% / year, or heck - even 6% per year, makes for some good living on a portfolio that makes for good living at 4% / year (4% annual withdrawal rate, that would be achieved via sales of TSLA shares each year when it's time to get living money).

We chat more about that over in the Applying Options Strategy "The Wheel" thread (I forget the exact name, and I created it!).
 
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All very true.

And, because it's hard to eat TSLA stock, or pay property taxes, I've begun experimenting with using the stock to sell covered calls (and cash I hold to sell cash secured puts). My focus is on a dividend scale strategy, with early results indicating 1% / month using TSLA call/put sales seeming to be pretty easy to achieve. It's more work than buy and hold a mutual fund, but I find that 'work' fun, and it appears to reward the effort.

And 12% / year, or heck - even 6% per year, makes for some good living on a portfolio that makes for good living at 4% / year (4% annual withdrawal rate, that would be achieved via sales of TSLA shares each year when it's time to get living money).

We chat more about that over in the Applying Options Strategy "The Wheel" thread (I forget the exact name, and I created it!).

Your post sent me back to Investopedia to learn what puts are. And to be reminded why I don't touch options with a ten-foot pole. I might take a peek at the thread you mention, but I don't expect to understand a word of it. Sometimes all you need to know is that you don't know enough to get involved. :)
 
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I'm more heavily invested in TSLA, but I've got some of the same dynamics at work. Also worth noting that I've been following the company (primarily) and the stock (secondarily) for 8 years, so I feel like I have an information edge on the analysts.

Anyway, I'm getting close to the point where I can cash out - of my TSLA as well as my job, and go sailing off into the sunset (or something like that).


But then I'm faced with a dilemma. I can cash out and leave everything in cash, but that's not a good approach to living in retirement. So then the question arises - what to invest in after cashing in the TSLA shares. H'mm - I consider every other investment to be of lower quality than TSLA, at least as of today. Therefore, the thing to do is to reinvest in TSLA (or just stay invested in the first place of course).

The one exception I would consider today are 1 or more of the ARK ETFs. Something more biotech focused might provide me some diversification while gaining access to a collection of companies and a field that I consider to be equivalently disruptive to Tesla. And all without needing to do my own research to figure out which ones to be in, and which ones to avoid.

I definitely won't go back to an SP 500 index fund (though I do believe there are good reasons for many investors to be in such a thing). For me though, the problem with the SP 500 is that it's more like the SP 50 with 500 company names on the list. It's become so top heavy that the moves in the index are the result of a small # of companies. If/when TSLA is added to the index, it'll be one of the few companies at the top of the index that moves the index (along with many tech companies).

So if what I want to achieve is a broad tech index, then yeah - that'd be a good place for me to go. But as good as that range of tech companies are, I consider all of them to be of lower quality than Tesla. So why buy the nearly good enough stuff, when you can have the best? (These are all my opinions, from which I base my actual investments and portfolio composition - my financial manager thinks I'm hair on fire crazy :D)
Have you ever looked at HASI? It is a REIT that focuses on RE and sustainable infrastructure assets. Nice dividend yeild.
 
Broadly true. I agree with @jhm on this one though - disruptive innovation is under priced by the market, and the old dead "safe" companies are over valued. Of course this is also my opinion about what will continue to be true 10, 20, 50 years from now as well; disruptive innovation companies have always been hard to value as early on, they look a lot like companies in the same field that fail at spectacular rates. It's much easier to value companies when they aren't growing all that fast, and they have 'real' financials with real earnings (what's left over there's no more growth / research to invest in). It's always important to look at financial, but when they are your primary source of evaluation, then TSLA has never been worth investing in (might just now be something to consider) as there's no profits to use in evaluating the company. Sort of like AMZN was :)

Anyway, if you agree with the premise that disruptive innovators are under valued (as the creators and operators of the ARK ETF's believe), then that's a good place to invest. More broadly, any mutual fund with a focus on finding and investing heavily in disruptive innovators will serve the purpose of gaining exposure to these types of companies.

If you don't agree with the premise that these companies are a path to systematic improvement to more generalized market indexes, then I happen to agree with you that the current winner is as much happenstance as not. In which case I go with something more passive and focus on the fees I'm paying (minimize fees and track the market = beat many professional analysts / active mutual funds).
I would conceded that investing in disruptive technology can face various risks of going after ill-conceived innovations (cough, Nikola), getting hyped up in fads (dot-coms), or getting the timing wrong (3D printers 7 years ago). So it is absolutely necessary to take a truly long-term view (10-15 years) and to do careful analysis of innovation. Another risk is that truly disruptive tech is going to make enemies among threatened incumbents, so disinformation and political attacks are likely challenges. But here, this information distortion is part of what makes the investment so good.

I find it amusing that TSLAQ folks want to hype up NKLA so much. One could invision an EV technology fund that indiscriminately invests in all companies that engage in the technology. I'm not so sure I want to blend NKLA in with my TSLA portfolio. One does well to discriminate between real disruptors and wannabes.
 
I would conceded that investing in disruptive technology can face various risks of going after ill-conceived innovations (cough, Nikola), getting hyped up in fads (dot-coms), or getting the timing wrong (3D printers 7 years ago). So it is absolutely necessary to take a truly long-term view (10-15 years) and to do careful analysis of innovation. Another risk is that truly disruptive tech is going to make enemies among threatened incumbents, so disinformation and political attacks are likely challenges. But here, this information distortion is part of what makes the investment so good.

I find it amusing that TSLAQ folks want to hype up NKLA so much. One could invision an EV technology fund that indiscriminately invests in all companies that engage in the technology. I'm not so sure I want to blend NKLA in with my TSLA portfolio. One does well to discriminate between real disruptors and wannabes.

Easier said than done @jhm. Can you name one company besides $TSLA that's a true disruptor and has potential to 10x or 100x over the coming decade? I literally don't know of any...
 
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There seems to be a boatload of EV start-ups out there that are so overhyped that one wonders if they really expect to produce a successful product, or if they're just trying to attract investors with big promises now that Tesla has shown what EVs can do.

Discerning which are the real potential disruptors, which are the crackpots, and which are the outright cons is no trivial matter. And most start-ups go bust even if their ideas were sound.

Consider EEStor. I thought it was a con from the very start. But they convinced a lot of people to give them money, and the Zenn car company, which was making very nice little cars, went bust because they fell for it and gave EEStor a bucketload of money.
 
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Have you ever looked at HASI? It is a REIT that focuses on RE and sustainable infrastructure assets. Nice dividend yeild.

Thanks for the tip. I've got a sliver of the portfolio in a real estate REIT (company is Fundrise) that's been doing exactly what I hoped it would. That dividend is decent, but I like the idea of a bit more diversification as long as it's genuinely uncorrelated (well - low correlation anyway), and I like the idea of investments that directly support and are focused on renewable energy.
 
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Okay Q2 is out of the way... The expected happened... GAAP profitability, S&P inclusion.... Now... we wait...
When are we going to go long $TSLA? Today's price is 21% implied discount on a 1.5T 2028 valuation.... My probabilistic model (based on $750B, $1T, $1.5T valuations) is showing a 12% discount. BLEH why would I buy $TSLA for 12% yearly growth?