Why I Sold My Tesla Stock ...

What's up you guys, it's Graham here. So, I rarely ever post videos like this on a Tuesday, and I promise this is going to be my last Tesla video for a little while. But given the recent and unprecedented price surge of Tesla stock over the last few days, I felt like this would be worth addressing so we could discuss what's going on, why the price has gone up about 40 percent over the last few days, and why I decided to sell half of my Tesla holdings this morning at nine hundred and twelve dollars a share.

Because at least for me, that's a pretty big deal considering I'm the type of investor who never likes to sell anything. I'm a very firm believer in the buy and hold investment strategy and not trying to time the market. Not to mention, I don't typically invest in individual stocks. Even with Tesla, my intention was to hold it a very, very, very long time because I believe in the company—not sell off half of my portion in less than a year from when I first bought it.

But when I see gigantic movements in price like we saw today, I can't help but want to lock in at least some of my profits. And here's what happened. When I bought my Tesla Model 3 in the beginning of 2019, as soon as they drove the car, I was in love with it. I never really understood the appeal of this company until I got behind the wheel, and it was really like the equivalent of me driving around an iPhone.

Like, it was quick, it was cool looking, it looked so futuristic, and within a few minutes, I knew I would never be able to go back to driving a gasoline-powered car ever again. So basically, as soon as I got home, I smashed the like button for the YouTube algorithm, and then I figured I would throw some money into Tesla stock because I felt like if I loved the car this much, other people would too, and that would bode well for the price of Tesla stock.

And I remember thinking to myself at the time, I wonder if this investment in Tesla stock would end up paying for the sales tax on my car. Oh wow, if that happened, that would be pretty cool. And that's when I bought in for two hundred and sixty dollars a share. Now keep in mind, this was not me investing my entire life savings into a single stock. However, I invested enough where if it went to zero dollars, I would be completely fine, and if it went up in price, then that would be great, and I would continue holding and then just see what happens.

Now, that might seem like a really good deal right now, but right after I bought the stock, it just tanked. This is the first individual stock that I have bought since high school, so I was convinced that the only reason it went down was because I happened to buy into it. Joke! After I bought the stock, I don't think I had ever seen a single day of profit. And within a few months of me buying in at 260 dollars a share, it went all the way down to one hundred and seventy-six dollars.

It just seemed like there was no good news for Tesla. It was article after article of bad news after more issues, and I was pretty discouraged. But I held on to it, and I was determined to ride it out and just see what happens. Like I said, I did not invest in an amount I was not comfortable with losing. That made me holding on to the stock that much easier without worrying about potential losses or investing too much money or the potential worry about what happens if it drops.

Well, flash forward to now—last month, Tesla was trading for 450 dollars per share. A week later, it was 537 dollars a share. Overnight, it jumped from 582 to 640 dollars a share. Then from Friday to Monday, it went from 650 dollars all the way to seven hundred and eighty dollars, and then today, from seven hundred and eighty dollars to nine hundred and fourteen by the time I'm making this video. And even though the exact factors that contribute to this type of explosive growth are somewhat unknown, we do have a few things that we could look at.

First, they mentioned this one in a previous video, but Tesla is the number one most shorted stock in the entire market. Which, if you're not familiar with what that is, shorting a stock is basically a bet that the value of the stock is gonna be going down. And if it does go down, you end up making money. But if it goes up in price, then you end up losing money.

Typically, stocks like Tesla go up if you have good news—maybe they exceeded production expectations, maybe they're opening up a new factory, or maybe Elon Musk smashed the like button for the YouTube algorithm. But in this case, there's really not that much news to justify a 40% increase in price within really just a few days, except Tesla just recently announced a quarter of profitability, and maybe the momentum of that caused short sellers to have to cover their positions. Or in other words, that caused Tesla short sellers to pay up their losses, and that caused an increase in demand, pushing prices for Tesla stock to go up.

After all, it's estimated that 18% of all Tesla stocks are shorted, and given how much the stock has risen in the last week, it wouldn't be surprising that those Tesla short sellers would have to pay a significant amount of money to cover these losses. And if there are not enough people to sell the stock in the first place, that could cause demand for the stock to rise rather quickly.

After all, when you short a stock, your losses could potentially be unlimited. Like, anytime you go and normally buy a stock and it goes down to zero dollars, that means you lost 100 percent of your money. But if you short a 100 dollar stock and it goes to 300 dollars, well that means you lost 300 percent of your money. So this is why short selling is a very risky endeavor and how people can lose a lot of money if and when it goes wrong.

The second, and this one is all just theory here—not financial advice—but the Chinese markets fell about 9% on Monday from the coronavirus fears, and during the sell-off, the Chinese central bank injected 173 billion dollars of capital into the financial system. So one might be able to possibly theorize here that as people were selling off their investments in China, they were looking for other safer investments that might make up for this loss, and Tesla might have been one of those investments given the recent surge in price.

Again, there's no proof that this has any relation to Tesla stock, but again, it could be theorized because this is for entertainment purposes only, not financial advice. Then third, you also have another analyst who raised their price expectations for Tesla stock from five hundred and fifty-six dollars to eight hundred and eight dollars, which I think absolutely fueled more demand for the stock to rise even higher. Not to mention, we have another analyst that now predicts 7000 dollar Tesla stock by 2024.

And fourth, I hate to say it, but there's really something to be said about the euphoria of making money. It makes me a little bit concerned that that excitement is driving the market more than logic because hysteria and excitement can only drive these prices so high until eventually people start taking profits, the prices start going down, and then it returns to a more reasonable level.

So, given all of that, I ended up selling half of my Tesla position for nine hundred and twelve dollars a share, and then I'm going to be holding on to the other half just to see what happens. That way, I could be a completely sane and reasonable investor who isn't afraid to take some profits when the time is right. Or in other words, when I'm more than tripled my investment in less than a year. But also, I'm not gonna sell off everything because I still believe in the company, and I think they have the potential to eventually become a 500 billion to 2 trillion dollar company if they just continue to innovate.

So hopefully, me selling half and keeping half is just gonna be the best of both worlds. Don't get me wrong though, I'm still bullish on the stock, and even at eight hundred dollars a share, I had no intention of selling whatsoever. But once I see this amount of irrational exuberance to bring a stock past nine hundred dollars a share just almost overnight, I get a little concerned. Then I want to cover some of my profits in the event it goes down.

But when it comes to selling stocks, and something that not a lot of people talk about, I want to mention it here. And that would be short-term capital gains tax. And here's how that works. Anytime you sell an investment that you've held for less than a year, it's taxed as though it's your ordinary income at your ordinary income tax rate. Meaning right now, when I'm making over a million dollars a year, my top federal income tax rate is 37 percent, plus an additional 13.3% to the state of California.

Meaning that, yes, I end up paying over 50 percent of my income to the federal government and states. That is fun. On the other hand, if I hold an investment like this for longer than a year, any profit I make is considered long-term capital gains. And if you make under 40,000 dollars a year, you end up paying zero dollars in long-term capital gains tax.

Then for anyone who makes between forty thousand and four hundred and forty-one thousand four hundred and fifty dollars a year, you're only gonna end up paying fifteen percent in long-term capital gains tax, which again is seven to twenty percent less than you would ordinarily pay with federal income tax. So overall, that's a pretty decent tax savings. And then if you're like me and you make over four hundred and forty-one thousand four hundred and fifty dollars a year, well, you would pay a flat twenty percent tax in long-term capital gains.

And then when it comes to me, it gets just a little bit worse. No matter if it's long-term capital gains or not, anytime I make a profit on anything in the state of California, it is going to be taxed as though I'm making ordinary income. In terms of the state of California, when it comes to my top tier tax bracket, that means I will owe another 13.3% in taxes. So that means if I keep my investment for over a year and then I sell it, I will end up paying a total of thirty-three point three percent in taxes.

However, if I hold an investment for less than a year and sell it, I will end up paying a total amount of 50.3 percent in taxes on whatever profit I make. So that just meant because I sold my Tesla shares in less than a year from when I first bought it, I need to be paying 17% more in taxes than if I just held on to it a little bit longer. This is why it's almost always more advantageous to buy and hold long-term and get a much better tax rate than it is to buy and sell within a short period of time and have taxes eat up your hard-earned money.

Yes, I absolutely took this into consideration when I was selling my Tesla stock. This is one of the main reasons I never wanted to sell any sooner. But when I saw today's run up of almost another twenty percent, I knew it was time to take some of my profits off the table and then reevaluate what I want to do with the rest of the money. If we end up seeing a big pullback, I might buy back in because I do believe in this company long-term, and I really believe they have a lot of potential.

But right now, what we're seeing to me just seems a little bit too irrational for me not to hedge my position a little bit and take some of the profit off the table. And honestly, who knows what's going to happen. Just during the time that I filmed this video, I've seen it go up to nine hundred and sixty-two dollars a share and then all the way back down to eight hundred and eighty-eight dollars a share, and that's just within the last like 45 minutes or so.

But I also don't want to get too greedy. I'm still keeping half, and I'm really interested to see what ends up happening and how this plays out over the next few weeks and few months because I promise you anything that ends up going up this quickly has the potential to go down just as fast. So I really want you guys, if you're in this or any other investment like this, to be careful, and really no one can predict what this is going to do.

I mean, we could all do our best to try to analyze the true fundamentals of what we think Tesla is worth, and I'm sure if we do that, each of us is going to come up with a completely different number. But really, at the end of the day, it's only going to be worth what someone else is willing to pay for it. And if someone wants to pay for the chance to make a profit rather than the intrinsic value of the company, then who's to say it can't just continue climbing even higher?

And I really believe long-term Tesla is absolutely a company to watch out for. They've carved out a very unique niche that's difficult for other automakers to compete with on a large scale, and I'm sure Elon Musk will continue improving and innovating to bolster this company's value even higher. But again, this is just my opinion for entertainment purposes only, and none of this is financial advice—purely just from my own perspective and my own opinion.

You guys know my affiliation with Tesla. Even though I do my best to be as unbiased as it possibly can, I do own Tesla stock. I do drive a Tesla, so that needs to be taken into consideration, and I'm also completely upfront with you guys with the Tesla stock I do currently have and when I sold off and what price.

So there you go! I hope you've enjoyed your not financial advice, purely for entertainment only video bonus video today on the Tuesday. So with that said, you guys, thank you so much for watching! I really appreciate it. As always, if you guys enjoy videos like this, make sure to destroy the like button, subscribe button, and notification bell so YouTube notifies you anytime I post a video.

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