How to Buy Tesla Shares in the UK

Tesla Inc (NASDAQ:TSLA) shares have gained exceptional popularity in recent years. With electric vehicles set to replace traditional combustion engines within the next decade, many investors are snatching up Tesla stock to tap into this transitional opportunity. And it’s not hard to understand why.

Creating a successful automotive business is an incredibly challenging task when facing off against industry titans like Volkswagen and Toyota. And yet, despite all odds, the company has succeeded, with many investors giving credit to its controversial CEO, Elon Musk.

Musk has proven to be a bit of a wildcard over the years, polarising some of the investing community. But his pursuit of innovation can’t be denied, with his company having some of the best battery technology in the world while simultaneously heading up the expansion of EV recharging station infrastructure globally.

But, like with any investment opportunity, there are always caveats to consider. With that in mind, let’s explore how British investors can buy shares in Tesla Motors and discuss whether it’s actually a sensible idea.

Can you buy Tesla shares in the UK?

First off, can UK investors buy Tesla shares? In short, yes. But it’s slightly different to the usual process of buying UK shares.

The company’s shares aren’t listed on the London Stock Exchange but rather on the Nasdaq exchange in the US. Therefore, anyone seeking to invest in the business will need a brokerage account that grants access to the US stock market.

Investors will also need to sign and submit additional tax forms. Without completing this step, most brokerages won’t permit international trading. And those that do could land an investor with a sizeable, and avoidable, tax bill if they ever decide to sell in the future.

There are a few alternative options for those who aren’t comfortable doing this extra leg work. Investors can turn to an investment adviser to handle everything for them. Or it’s possible to indirectly invest in Tesla through an exchange-traded fund or mutual fund. However, these later options could result in owning a collection of other businesses an investor may not be interested in.

How to buy Tesla shares in the UK 

Let’s go through the five main steps of adding Tesla shares to an investment portfolio.

1. Open and fund a brokerage account

Before investors can get started, they need access to a brokerage account. This is a special type of bank account where individuals can make deposits and use their capital to buy shares in publicly traded companies.

There are countless brokers to choose from, each with its own advantages and disadvantages. And it’s up to the investor to select the most appropriate for their situation. For those seeking to invest in Tesla, the broker must allow investing in individual stocks rather than just funds, and it needs to grant access to the US stock market, not just the UK market.

It’s also essential to check how a platform handles currency conversions. Given Tesla is a US stock, it trades in US dollars instead of pound sterling. Most brokerages will charge a currency conversion fee that will impact trading costs.

Another special type of brokerage account British investors should consider is the Stocks and Shares ISA. ISAs often carry higher account and commission fees than other popular online trading platforms. However, they provide immunity to all capital gains tax and dividend income taxes from investments. In the long run, this can have a profound positive impact on the wealth-building process.

2. Build an investment thesis

With a suitable brokerage account open and funded, the next step is to design an investment thesis surrounding Tesla. This is effectively a collection of notes stating why an investor wants to invest with appropriate justifications and outlining the risks.

As explosive as Tesla’s past share price performance has been, there’s never a guarantee that its upward momentum will continue in the future. Therefore, despite how powerful the feeling of missing out can be, investors need to take time to appropriately research the company before buying Tesla stock.

That means understanding the business, analysing the financial statements, background checking the management team, finding the weaknesses, identifying the opportunities, and deriving an appropriate valuation. This helps make a more informed investment decision and helps to determine when to sell in the future.

Needless to say, it’s a lengthy process. But it is one that can avoid traps and lead to far superior returns in the long run. If investors don’t understand where they’re investing their hard-earned money, they will likely end up destroying their wealth rather than creating it.

This is where a service like The Motley Fool Share Advisor can help significantly accelerate the research process.

3. Decide the appropriate allocation

With a firm understanding of Tesla’s business model and risks, investors need to decide how much to invest in the company. And there is no real right or wrong answer here.

The correct amount ultimately depends on the personal circumstances of the investor. Factors to consider include existing investments regarding the impact on portfolio diversification and personal risk tolerance. After all, if a conservative investor concludes that Tesla is a high-risk enterprise, putting all their life savings into its stock isn’t likely to lead to a good night’s sleep.

4. Buy Tesla shares

With a capital allocation decision made, it’s time to buy Tesla shares. After signing into their brokerage account, all an individual has to do is go to the share dealing section of their trading platform, type in “Tesla” or “TSLA”, enter how much money they want to invest, and click the buy button.

As a reminder, since Tesla is an American business listed in the US, investors can only buy shares while the US stock market is open. The Nasdaq exchange is open between 9.30am and 4.00pm local time, which translates to 2.30pm to 9.00pm in UK time, from Monday to Friday.

5. Review and adjust

After adding a business to their investment portfolios, investors need to keep tabs on how things are going. Reviewing the firm’s progress and the arrival of potential threats allows investors to make any necessary adjustments to their position, whether that’s to increase or reduce their stake in the business.

Where to buy Tesla shares in the UK

As previously mentioned, to invest in Tesla shares in the UK, investors need to open a brokerage account that supports international trading, specifically to the Nasdaq stock exchange in the US.

Brokerages will list which stock exchanges they support on their websites, as well as a full breakdown of their fees. Investors should spend time comparing and contrasting which types of accounts are most suitable for their circumstances. It’s also important to consider using a Stocks and Shares ISA as well for tax benefits.

Is it worth it to buy one share of Tesla?

When it comes to investing, the number of shares owned in a business is practically meaningless. What matters is the amount of money invested. Today Tesla shares are trading at a stock price of around $180 each. 

For investors with a small amount of capital, that could be a considerable investment versus other positions in their portfolio. And some may even have to resort to using trading platforms that support fractional shares. But for others, buying a single share may not even represent 1% of their holdings and might as well not exist.

So, is it worth buying a single share of Tesla? The answer ultimately falls back on the previously mentioned investment thesis. Suppose the company meets an investor’s personal requirements without breaching their risk tolerance, and a single share is all they can afford. In that case, even a small investment may still be worthwhile.

Should UK investors buy shares in Tesla?

Whether UK investors should buy Telsa stock all boils down to their investment thesis and personal investing strategy. 

As legendary investor Warren Buffett says, if you’re going to be a stock picker, “You’ve got to be prepared when you buy a stock having them down 50 per cent or more and be comfortable with it”. For conservative UK investors uncomfortable with high-risk investing styles, it may be prudent to find an alternative method of tapping into the opportunities created by electric vehicles.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.