By John Drachman
Some companies rise above the practicality of price/earnings ratios and cash flow to represent something larger: the idea of American enterprise itself.
It’s why investors prefer the volatile and visionary Tesla over more Main Street stocks like General Motors.
Named the most valuable car company in the world, Tesla shares gained 255% just this year. Soon this hybrid technology and automobile company will be included in the S&P 500 Index – a milestone that will likely to send pension funds and endowments scurrying for shares.
If you’re visionary enough to believe electric cars like Tesla will soon be mainstreamed, you might take a look at other players entering the game – some of which have the potential to be game changers themselves. Recent newcomers like Nikola and NIO are setting their sights on one-upping Tesla’s performance success.
Investors who believe the future will be filled with electric vehicles could invest in all three companies. By buying fractional shares instead of paying thousands of dollars for single shares, you can specify the dollar amount you want to invest in each company. By setting up a systematic investing program through a broker-dealer, you can also take advantage of a time-tested strategy – dollar-cost averaging – that lets you buy more of a share when the market is down and less of a share when the market is up.
If you’re the type who likes to paint with an even broader brush, however, consider investing beyond the electric vehicle niche to include a broader spectrum of innovation. A number of tech-centric Exchange Traded Funds (ETFs) have been beating the broader market easily this year:
- First Trust NASDAQ Clean Edge Green Energy Index Fund tracks the Nasdaq Clean Edge Green Energy Index.
- Invesco Solar ETF offers global exposure to solar stocks by tracking the MAC Global Solar Energy Index. U.S. firms dominate, followed by China and Spain.
- SPDR NYSE Technology ETF offers exposure to electronics-based technology companies by tracking stocks in the NYSE Technology Index.
- iShares Expanded Tech-Software Sector ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index.
If you want to go even broader, consider the securities in the technology-heavy Nasdaq 100. This Index is comprised of some of the largest technology stocks in the world as well as retail, biotechnology, industrial, and health care stocks. The Nasdaq 100’s one-year return through August 13 outperformed the S&P 500 49.2% to 19.4%, respectively. While you cannot invest directly the Index itself, you can invest in its proxy, the Invesco QQQ Trust.
Validating the American Dream
Stocks like Tesla have a knack for surprising Wall Street on the upside and the downside. When analysts called for losses in the first and second quarters, Tesla delivered profits instead. While investing on your own can be rewarding, enlisting the services of a licensed professional can also help validate your ideas and reduce downside exposure before investing again in our great American experiment.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.
