Tesla's stock has been on a wild ride. TSLA was priced in the $260 range as recently as October of 2019. That's just three months ago. Since then, it has gone over $960 and today it is priced at $746 as this story is being written. No stock behaves this way based on stock valuation metrics related to earnings or profits. Like many stocks, the price is being set by speculators who envision a profitable Tesla with expanded future revenues. There is certainly nothing unusual about that. The stock market moves on emotion as much as it does accounting.
One smart Tesla Model 3 owner and self-made millionaire recently bought into Tesla when it was priced around $260 and sold when it was priced at $914. He more than tripled his money, right? Sort of, as we will explain. What he did definitely do is make a big profit by clicking a mouse. And by being smart and having some intestinal fortitude. He held his stock when its value dropped to below $180 per share.
Graham Stephan is a real estate investor and realtor living in L.A. He says that he was a millionaire by the age of 26. Not bad. Particularly for a guy working in a job that requires no college education. Graham also has a Youtube channel and he offers advice and entertainment. One recent topic, aside from his how to get rich in real estate videos, is one titled "Why Tesla Is Unstoppable." He is not a stock analyst.
Graham explains why he bought, why he held, and why he sold. His explanation seems outstanding to us. Particularly since he bought low and then sold very near to the top of the stock price. However, he warns other investors to think twice before they sell their Tesla stock if they also bought in late 2019.
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The reason is short-term capital gains tax. Successful individuals who live anywhere in the United States have to pay a steep taxation on any profits they make on stock held for less than one year. In Stephan's case, in his high-tax state of California, the rate of taxation on the profits on a stock held for less than a year is over 50%. He explains the details in his video above. If he were not successful and had a very low income, he would have paid far less. This is America. The successful pay the majority of the taxes here. By total dollar amount and also by percent. The top ten percent of income earners pay 70% of the total income tax revenue collected in America.
Had Stephan held the stock for a year or more, he would still have to pay a steep tax, but the rate would be dramatically lower than 50%. So he wants Tesla stockholders to think about that before they make a quick exit from the investment. But there is more. Stephan didn't sell all of his Tesla stock. Just half. He thinks the company is worth investing in for the long term and he is a big fan.
The author is not a stock analyst. He holds no individual stocks and recommends no position on TSLA. John Goreham is a life-long car nut and recovering engineer. John's focus areas are technology, safety, and green vehicles. In the 1990s, he was part of a team that built a solar-electric vehicle from scratch. His was the role of battery thermal control designer. For two decades he applied his engineering and sales talents in the high tech world and published numerous articles in technical journals such as Chemical Processing Magazine. John's work has appeared in print in dozens of American newspapers and he provides reviews to many vehicle shopping sites. You can follow John on Twitter, and view his profile at Linkedin.