Making money with TSLA vs the S&P 500

By Jani Ziedins | Free CMU

Feb 19

Cracked.Market University

Alternate title: Why I swing trade the indexes

It is hard to ignore what is going on in TSLA with the stock up 43% this month alone! While it definitely feels like this shocking move left a lot of us behind, should we actually feel bad about missing it?

There are a lot of reasons why I settled on swing-trading the indexes using leveraged ETFs. One of these days I will write more about the fundamental reasons I like this trade. But for today, let’s focus strictly on performance. How does swing-trading the indexes using leveraged ETFs compare to holding a basket of the hottest stocks, including the record setting TSLA?

First, I am only comparing owning the underlying stocks since that is what sane people do. While there are plenty of internet stories of people turning $1,000 of far out of the money calls into a million bucks on TSLA, that is nothing more than gambling with lottery tickets. People who approach the market with such a total disregard for risk management go broke within a year. (There are responsible ways to structure Black Swan trades, but I doubt any of the people making headlines were doing it responsibly.)

Also in the name of risk management, let’s assume any sane person holds a basket of highflying stocks since putting all of their money into a single stock is also reckless. But not to give anything away, this hypothetical person is extremely aggressive and his entire portfolio is concentrated in this market’s hottest trades.

For the sake of argument, let’s say he holds five popular growth stocks: TSLA, NFLX, AMZN, FB, and let’s throw an IPO in there for fun, PTON.

How does this basket of stocks compare to UPRO, the 3x leveraged S&P 500 ETF, since the start of the month?

TSLA: +43% Outstanding!
NFLX: +12% Great!
AMZN: +8% Solid!
FB: +7% Good!
PTON: -17% Can’t win them all.

Average: 12%  For only a few weeks of work, that is a fantastic return!

Now for the boring index fund:

UPRO: +16%

Yup, you read that correctly. A borning index ETF outperformed a basket of the hottest stocks, including the nearly unpreceded surge in TSLA. Do I feel bad about missing TSLA? Nope, not in the least.

Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every week.

What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, have actionable analysis and a trading plan delivered to your inbox every day during market hours

Follow Jani on Twitter

Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM $AAPL $AMZN $TSLA


About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.