What Elon Musk’s Money Moves Can (and Can’t) Teach Average Investors
Written by
David Nadelle
Edited by
Jenna Klaverweiden
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To say Elon Musk is a polarizing figure will be one of the biggest understatements you’ll read today.
His sheer wealth makes him one of the most influential people on Earth, but does that influence translate to the average American investor, and are the plans contained in his wealth-building blueprint practical to anyone but billionaires?
Let’s take a look at what you can and can’t learn from Musk’s financial strategies.
Also see how much money Musk makes in a day.
What the Average Investor Can Learn From Musk
Part of the difficulty with looking to Musk for everyday investing advice is that his wealth affords him unlimited resources and his businesses deal in the billions, far more money than any average American will ever see in their lifetime.
However, any successful businessperson has strategies that will appeal to both the beginner starting out and the seasoned investor looking to up their game. Musk, although an outlier, is no exception.
Transformative Technologies
Much of Musk’s success can be attributed to his unwavering dedication to his entrepreneurial vision, which is largely based on identifying emerging technologies and disruptive trends early.
Predicting future trends via investing is a risky game, but looking to innovative companies that have the ability to upend established markets for many years to come can pay off. “Investing in disruption may mean investing in companies that are directly driving long-term changes or are potentially affected by those changes,” per Fidelity.
Investing for the Long Term
New investors can be forgiven for constantly monitoring their trading apps. However, at some point, you must overcome the fear or greed that is causing you to be so watchful.
Investing is a lifelong journey, and although Musk is primarily invested to his own enterprises, his tendency to hold investments through downturns is a good lesson for those simply looking for quick returns.
What Musk’s Investment Strategies Can’t Teach
As mentioned above, Musk’s wealth gives him a major competitive advantage as an investor. Access to large liquid resources and dedicated shareholders enable him to absorb losses and assume risks that far exceed the capacity of the average American.
Diversification Protects Wealth
A concentrated portfolio can build wealth, as Musk is primarily known for funding the few companies that he controls. However, it can be a risky approach in the event of a significant economic downturn. Having a single-stock position or a concentration-or-bust mindset can devastate the average investor if those scarce stocks should fail.
Musk himself has come close to financial ruin, posting on X in 2020 that Tesla had been about a month away from bankruptcy after the “Production & logistics hell” of trying to mass produce the Model 3. The average investor would be wise to diversify.
Investing In His Own Companies
Investing as much as Musk can in his own ventures makes them successful and gives him a level of control beyond that of any investor.
The average stock market player has little leverage. They can’t borrow hundreds of millions against their shares, pull in institutional backers to help fund a company, put up their own money as collateral for company loans, or make key operational and financial decisions. Average investors can’t move markets; they can only react to them.
Editor’s note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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