Many people wish they had bought Tesla (NASDAQ:TSLA) stock when it first came out because it has gone through the roof. An interesting woman recently called “The Ramsey Show” to get financial help about her Tesla stock, which went from a small investment to a huge one.
Problem for her? Whether to sell the stock and pay off her mortgage or keep it because, in her words, “Nobody knows what Tesla can do.”
Tesla Stock Worth $1,000 to $380,000
The caller said she put $1,000 into Tesla stock in 2011, when the company was still young. The stock went up in value over the years, and she didn’t add any more money to her account. It reached over $380,000. Her family owes $288,000 on their house and is thinking about whether to sell the stock to get rid of the mortgage.
On “The Ramsey Show,” host and financial expert George Kamel was pleased by the caller’s success. He was shocked and asked, “What?” She then told him that she had indeed turned $1,000 into hundreds of thousands of dollars without adding any more money to the stock.
What Could Go Wrong If You Only Hold One Stock
Even though Kamel was happy about the great return, he warned the caller to be careful. He talked a lot about the risks of putting so much money into one stock, even a well-known one like Tesla. “As soon as you can get that house paid off and get out of a single stock, the better,” said he.
His advice is in line with basic financial knowledge: spreading out your finances can help protect you from market downturns. Like any other stock, Tesla’s can go up and down. If she holds on to the stock, the price could go up or down, which would lower the value of her income.
What Taxes Had to Do with the Choice
The tax consequences are one of the most important things to think about when selling such a large amount of stock. Kamel told the caller that they should talk to a tax expert before taking any action. The stock’s value has gone up a lot since she bought it, so she would have to pay capital gains taxes if she sold it. It depends on how much she makes and how long she has owned the stock. The tax bill could be big.
Kamel offered that instead of selling everything at once, parts of the stock could be sold off slowly over a few years. By spreading the gains over several tax years, this plan might help her pay less in taxes total, which could help her stay in a lower tax bracket.
Can the mortgage be paid for by her income instead?
The caller’s family income is another thing to think about. She said that her family makes $275,000 a year, which is a good amount of money. Kamel’s advice makes it sound like they might be able to pay down the mortgage quickly without having to rely on the Tesla stock sale alone.
What should she do?
In the end, her cash goals and willingness to take risks will determine her choice. While paying off the mortgage would be safe and get rid of the monthly payments, hanging on to the stock could bring in more money, but it also comes with more risk. Talking to a tax and financial expert could help her figure out what the best thing to do is in her case.
Also Read: Tesla Seems to Be Puttingtogether a Teleoperations Team for Its Robotaxi Dervice
For investors in the same situation, the most important thing to remember is that big gains in the stock market can change your life, but you need to plan carefully to make sure those gains lead to long-term financial security.
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