The Motley Fool

Forget Tesla Stock: Buy This 1 Canadian ETF Instead

Image source: Getty Images

Tesla (NASDAQ:TSLA) stock has dropped 14% since April to U$652 after rising as much as US$800 earlier this year. It’s not that Tesla’s business is facing issues; it’s because of Tesla’s owner, Elon Musk. His tweets not only affect Dogecoin and Bitcoin prices but also Tesla’s share price. Tesla is a good stock that can make you a millionaire only if you dare to survive Elon Musk bubbles. 

Tesla’s biggest risk is a Musk bubble burst 

Spiderman’s uncle rightly said, “With great power comes great responsibility.” While Elon Musk is a genius visionary who dares to change the world, he is not quite the apple of the eye of shareholders. 

If you remember the time from August to September 2018, Musk took to Twitter, making “false and misleading” statements about taking Tesla private. The U.S. Securities Exchange Commission (SEC) even slapped him with a heavy fine and took away his title as the board chairman of Tesla. Hence, when Musk took to Twitter again in February 2021, promoting Bitcoin and Dogecoin, shareholders showed their resentment. 

If you look carefully, shares of Tesla moved in the opposite direction with BTC and Dogecoin. Between February 1 and March 8, Tesla stock fell 35.5% while the Dogecoin price surged 1,837%. Did Tesla invest in Dogecoin? No, but Elon Musk did. And a company’s stock price is influenced by the acts of its management.   

Going by fundamentals, Wall Street analysts have a median price target of $725 or Tesla, an 11% upside, and a bullish target of 125%. There is such a wide gap because many variables are supporting future growth. Tesla’s new model will broaden its portfolio that is largely dependent on Model 3 and Model Y. It is also expanding its battery manufacturing and opening new facilities in Berlin and Austin. The electric vehicle (EV) wave will ensure there is no demand shortage. All Tesla has to do is pump up supply. But what investors fear is the Elon Musk bubble, which is hyperactive and unpredictable.  

A Canadian ETF  

If the Musk bubble scares you, you can consider diversifying your portfolio with iShares NASDAQ 100 Index ETF (CAD-Hedged) (TSX:XQQ). This Canadian ETF replicates the NASDAQ 100 Index, which includes Tesla, PayPal, and other tech juggernauts. From chip and device makers to software developers, everyone is in the NASDAQ 100 Index. Even the Motley Fool owns and recommends many stocks that are included in the NASDAQ 100 Index.  

XQQ has holdings in stocks like AlphabetApple, and Amazon. The ETF is less volatile than Dogecoin or BTC but has the potential to give 20-30% growth every year. 

With holdings in NvidiaIntel, and Alphabet, the ETF will benefit from the artificial intelligence revolution. Similarly, it will benefit from the 5G, Internet of Things, electric and autonomous vehicles, and software as a service break out. 

Moreover, the XQQ ETF is cheaper than Tesla, with a trading price of $111.64. You can also buy the ETF using the Tax-Free Savings Account. This way, your investment can grow tax-free. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, NVIDIA, PayPal Holdings, Tesla, and Twitter. The Motley Fool recommends Intel and recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, long January 2023 $57.50 calls on Intel, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, short January 2023 $57.50 puts on Intel, and short March 2023 $130 calls on Apple.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.