What does Tesla joining the S&P 500 mean?

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The Standard & Poor's 500 Index tracks the stock performance of 500 of the largest companies in the United States. Tesla finally made the cut after a truly remarkable year.

The manufacturer enjoyed five consecutive profitable quarters, alongside increasing demand for electric vehicles, and its share price jumped more than 730% in 2020.

By this past weekend, Tesla stocks had reached an all-time high of $695 a share.

Its inclusion in the S&P 500 gives the often volatile Tesla stock a shot of credibility, as the index is considered a key benchmark for the U.S. economy.

And Tesla didn’t just sneak into the bottom of the list; the company opened with a 1.69% weighting in the index. The only companies with a larger weight? Apple, Microsoft, Amazon and Facebook. How’s that for impressive company?

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How to easily invest in Tesla

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So, who has an extra $700 laying around during this rollercoaster of a year? Don’t worry, there are several ways to invest in Tesla without buying a full share of your own.

The app Robinhood allows its users to buy tiny pieces of large companies like Tesla. These “fractional shares” allow you to invest with as little as $1. Best of all, Robinhood doesn’t charge any fees or commissions for basic trading.

Don’t want to put all your eggs in Elon Musk’s mechanized basket? Now that it’s part of the S&P 500, you can easily invest in the company as part of a diversified portfolio.

How to invest in the S&P 500

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So, you want to invest in the league of heavyweights that Tesla just joined. Rather than purchasing hundreds of individual stocks, you can just invest in a single index fund or ETF tied to the S&P 500.

These funds contain slices of all 500 companies and try to mimic the performance of the overall index. (Just note that not all funds have finished acquiring their Tesla stock yet.)

You can even get a piece of these mammoth companies with some spare change. The Acorns app will round out your debit or credit card purchases to the nearest dollar and invest the leftover pennies.

Simply choose an Acorn portfolio that includes an ETF that mirrors the S&P 500 — and voila, you’ll own a piece of Tesla.

And if all of this sounds a bit intimidating, don’t be afraid to get some expert advice before you hit the stock market. A certified financial planner, like the ones available online at Facet Wealth, can help create a personalized plan that makes sense to you.

Fine art as an investment

Stocks can be volatile, cryptos make big swings to either side, and even gold is not immune to the market’s ups and downs.

That’s why if you are looking for the ultimate hedge, it could be worthwhile to check out a real, but overlooked asset: fine art.

Contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

And it’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.

On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and the S&P 500 was just 0.12 during the past 25 years.

Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to outperform over the next decade — due largely to the asset’s track record as an inflation hedge.

Investing in art by the likes of Banksy and Andy Warhol used to be an option only for the ultrarich. But with a new investing platform, you can invest in iconic artworks just like Jeff Bezos and Bill Gates do.

About the Author

Ethan Rotberg

Ethan Rotberg

Former Reporter

Ethan Rotberg was formerly a staff reporter at MoneyWise. His background includes nearly 15 years as a writer, editor, designer and communications professional. He loves storytelling, from feature writing to narrative podcasts. His work has appeared in the Toronto Star, CPA Canada and Metro, among others.

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