Ways To Invest In Tesla Beyond Buying TSLA Stock

Tesla (TSLA) is one of the most closely followed and debated stocks. That’s what happens when you create a new industry (electric vehicles) and trade in a price range from $100 to $400, and back to $100 again, all within a few years time. And let’s not forget the emergence of Tesla founder Elon Musk on the political front.

All this may lead investors to wonder how best to get exposure to Tesla stock, other than buying it directly. That’s where exchange-traded funds can represent a wide range of “access points” for different types of objectives. Popular indexes like the S&P 500 have ETFs that allow investors to profit from its declines, to earn extra income from it via option positions, and to add leverage. More recently, allowing investors to put those types of enhancements around individual stocks has been a priority for some ETF product creators.

But in the case of Tesla, we might just have the widest array of choices for how to “drive” your profits forward. Here are seven I picked out, and how I’d potentially use them. Note that these are my own observations and research. They are not recommendations, simply a way to expand the range of what is possible for investors who don’t drill down on this as I have been doing for decades. Do your own due diligence before making any investment decisions.

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7 ETFs To Invest In To Get Access To Tesla Without Buying TSLA

SPDR Select Sector Consumer Discretionary ETF (XLY)

This is one of the 11 sector SPDR ETFs, and TSLA is the second largest consumer discretionary stock to Amazon (AMZN). TLSA is currently 18% of XLY’s assets. AMZN is 22% and Home Depot (HD) checks in at 8%. So nearly half of XLY is in these three stocks.

XLY has $24.3 billion in assets under management and a low expense ratio of 0.09%.

Pros

• Diversification
• Access to other large consumer stocks

Cons

• Only investing in one of the 11 S&P sectors
• AMZN and HD weakness can impact the fund negatively

Use Case

I want to own Tesla but with some diversification around it. This is one way in which my approach to ETF investing is likely very different from most. I like concentrated funds, since it allows me to zero in on a smaller basket of names that at times are really all I want from that market segment. I don’t need a piece of 93 stocks in a single sector! This is for investors who prefer to reduce the risk of any single stock.

ARK Autonomous Technology & Robotics ETF (ARKQ)

The focus of this ETF is long-term growth of capital achieved by investing in companies that benefit from the development of new products and technologies, such as autonomous mobility, intelligent devices, adaptive robotics, neural networks, reusable rockets and advanced batteries. Tesla is ARKQ’s top holding (17% of assets). ARKQ has total assets of $968 million and an expense ratio of 0.75%.

Pro

Complements TSLA exposure with allocations to defense, cybersecurity and space exploration.

Con

Volatility. Made a big “round trip” in price the past three years, losing 50% and then gaining 100% to net out to a break-even over that period.

Use Case

I want to own TSLA and other autonomous tech stocks, but not Amazon. This is also a diversification move around Tesla stock, though using a thematic group of stocks instead of just those in the same consumer discretionary sector.

Direxion Daily TSLA Bull 2X Shares ETF (TSLL)

This is TSLA times 2, though it is not always that simple. As with all ETFs that, like this one, employ leverage, the concept of making 2x the gain or loss of TSLA should be assumed to only be good on a daily basis.Still when TSLA goes on one of those manic upside runs, 2x is an attractive consideration to me. TSLL has an expense ratio of 0.96%.

Pro

“All bulled up” on Tesla, with potential to make twice as much as owning the regular common stock.

Con

What Tesla giveth twice as much, it also taketh away twice as much.

Use Case

Since I’m a chartist at the core, I can decide to buy a good TSLA chart or buy a good TSLL chart with half the assets at risk. This ETF might appeal to those who are comfortable with leverage, pursuing twice the gain with twice the risk.

Direxion Daily TSLA Bear 1X ETF (TSLS)

Leveraged ETFs are a relatively new creation. Single inverse ETFs have been around since 2006. And that means I’ve been using them liberally for 18 years. The ones that move opposite major market indexes have been a “go-to” for me as an offense-defense investor since prior to the global financial crisis.

Newer on the scene are single stock inverse ETFs, such as the ones offered by Direxion, T-Rex and other fund firms. Again, the daily objective means that longer time periods often will not be the mirror image of the underlying “long” stock performance. TSLS has an expense ratio of 1.07%.

Pro

Efficient way to essentially “short” TSLA, on a 1:1 daily basis.

Con

Investors tend to undereducate themselves on the “math of investment loss.” In other words, if TSLA goes up 20% as it has done in short time periods many times, this would drop approximately 20%. But that means you need to make 25% just to get back to even, not 20%.

Use Case

When I think TSLA is overpriced short-to-intermediate term, and want to try to profit from a potential decline of some magnitude. TSLS could appeal to those who wish to try to profit from a decline in TSLA. Note that big “round trip” move I noted at the start of this article.

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T-Rex 2X Inverse Tesla Daily Target ETF (TSLZ)

This fund takes the 2x and inverse concepts and combines them. That would not have worked well if held throughout 2024. But don’t be fooled by that full-year summary. During the course of this, its first full year of existence, TSLZ has had 1-month up moves of 80%, 50% and 30%. These are tactical vehicles, period.

Pro

Potentially a “cleaner” way to try to capitalize on declines in Tesla stock than using put options. That’s because TSLA is so volatile, buying options can be very expensive.

Cons

• Being 2x inverse or “short” a stock that can fly higher like a SpaceX rocket can produce big losses, quickly.
• Expense ratio is high.

Use Case

I own TSLA but am concerned about its near-term price picture, so I can consider this to hedge some of that, and try to avoid the full downside risk. Or, I can use this to try to profit from the next major dip in TSLA. For those who don’t just think the stock will fall, but do so quickly, this ETF, like other inverse funds, aims to be held for short time periods.

YieldMax TSLA Option Income Strategy ETF (TSLY)

This is another in the series from YieldMax ETFs that I’ve written about here recently. TSLY aims to deliver a very high income return and a total return of about 80% of the ups and downs of TSLA stock. TSLY has total assets of $1.0 billion and an expense ratio of 1.0%

Pro

Big income payout, aims to capture about 80% of up moves in TSLA on a total return basis.

Con

Tends to track about 80% of the downside in the stock.

Use Case

Bullish on TSLA but prefer to earn more of my total return as income, with some upside potential beyond that. This relatively new ETF might appeal to those who want to ride along with Tesla, but exchange some potential capital appreciation for current income.

YieldMax Short TSLA Option Income Strategy ETF (CRSH)

Finally, another one from YieldMax, but a departure from their core product line. This fund, which has an expense ratio of 0.99%, started trading in May, so I’ll use this directly from the fund management firm:

YieldMax Short TSLA Option Income Strategy ETF is an actively managed ETF that seeks to generate monthly income from a synthetic covered put strategy on TSLA, while providing indirect short exposure to the share price of TSLA. CRSH seeks to benefit when the TSLA share price decreases, however CRSH’s potential corresponding benefit from decreases in the TSLA share price is limited. CRSH seeks to manage potential losses (i.e., cap losses if the TSLA share price experiences significant gains) by purchasing OTM call options.

Pro

Big income payout.

Cons

• Big price drops if the stock goes up, likely in excess of the income received.
• Small fund, only $17 billion in assets

Use case

This brand new ETF is only for the very bold, and who are bearish on Tesla stock. It produces a high income level, but declined more than 40% of its price during its first six months in existence.

My Current View On TSLA And Related ETFs

The good news on TSLA: it has more than doubled since last spring. The bad news on TSLA: that giant move brought it back to where it traded about three years ago. I’m no fan of “dead money” (old Wall Street term) especially when it comes in the form of a political football, which was halfway to a meme stock even before the founder ended up in a potentially influential quasi-government position. There’s a lot to consider here, and this story is much more complex than a lot of places I can decide to put my money.

Knowing that these ETFs exist is step one. Understanding them is step two. Determining how to use them, when to use them and how to avoid getting burned from anything related to Tesla’s volatile underlying stock price movement is all part of the “next level” of learning how to design portfolios for modern markets.

Disclosure: I own some of the funds mentioned in this article.

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