Can investing in one company make you a millionaire? We all know that investments can rise and fall in value. And, that a wise investor spreads their risk across different sectors and across different markets.
But, between Xmas and New Year there was a story on the BBC about the soaring share price of electric car maker Tesla which has created what it described as an ‘army of millionaires’ – the so-called ‘Teslanaires.’
The world’s most valuable car company
Shares in Elon Musk’s company soared more than 700% in 2020. This made Tesla the world’s most valuable car company and Elon Musk the world’s richest man. As well as making many investors in the company millionaires.
But as the article rightly points out, it has been a bumpy road for Tesla. In May of last year Elon Musk wiped $14bn (£10.2bn) off the company’s value when he carelessly tweeted that, in his opinion, the Tesla share price was too high.
We all need to remember that for every Tesla there is a Sirius. Sirius Minerals was a mining company, granted the right to mine potash in the North Yorkshire Moors near Whitby. Many local investors, swayed by stories of the potential returns, invested heavily, putting their life savings and pension lump sums into the company. But the shares steadily dropped, the company was eventually taken over with the shares trading at 5.5p and the local investors were left facing heavy losses.
The winners and losers
Yes, shares like Apple, Nike and Starbucks may have produced spectacular returns for investors on their way to becoming household names. But many, many companies have gone in the opposite direction. April 2019 saw Debenhams go into administration and what could have been safer than the British high street? Surely people will always need to shop, they will always need new clothes… But that was before the pandemic. 2020 was the worst year for high street job losses and store closures in 25 years.
There will always be winners and losers in investing. And, the good news stories, the ‘Teslanaires,’ will always receive plenty of publicity. After all, ‘Investor takes sensible long term decision with their financial adviser’ is hardly a headline story.
But for our clients, it is the best course of action and always will be. Becoming a millionaire by investing in one company wouldn’t be in our plan. A carefully constructed portfolio, in line with your financial planning goals and consistently monitored by your financial adviser may not make the headlines, but it will certainly let you sleep at night. We are here to help and advise. If you would like to receive further information regarding your financial planning please contact us.