Is Tesla the Meme Stock of Yesteryear?

For years, Tesla stock charged ever-higher despite weak operating results. So far in 2021, that pattern has reversed itself.

Second-quarter results from Elon Musk’s auto maker were the company’s strongest on record. Tesla booked US$11.9 billion in sales and earned $1.1 billion in quarterly profit according to generally accepted accounting principles. Both figures topped analyst expectations. And while Tesla sold $354 million of regulatory credits to rivals, the auto maker would have easily finished the quarter in the black without them. Results were flattered by Tesla receiving certain goods and services from suppliers for which it hadn’t yet been charged, but Mr. Musk still deserves credit for that strong performance.

Tesla managed to deliver more than 200,000 cars in the quarter despite the global semiconductor shortage. And the falling price of bitcoin, which the auto maker carries on its balance sheet for some reason, only resulted in a $23 million hit to the bottom line.

But while Tesla’s actual business has lately come of age, the stock isn’t playing along. It was slightly higher on Tuesday morning, had dropped 9% so far this year and is down by more than a fifth over the past six months, lagging bigger rivals like Ford and General Motors. Meme stock aficionados, who couldn’t get enough of Tesla until recently, seem to have moved on to cryptocurrencies, brick-and-mortar video-game retailers and movie-theatre chains.

One reason: Tesla’s excellent results underscore how disconnected its valuation is from business reality. Tesla has earned $1.41 a share so far this year. If the auto maker continues to shine in 2021, it might earn $4 a share on a GAAP basis. At the current stock price, the company is valued at more than 150 times that still-hypothetical earnings figure—orders of magnitude higher than any comparable rival.

And the news wasn’t entirely positive on Monday: Tesla said its semitrailer truck, which Mr. Musk first showed to the public in 2017, wouldn’t begin production until next year. Given Tesla’s decade-long track record of overpromising on timelines, investors shouldn’t be expecting even this new guidance to hold up.

Meanwhile, rivals such as Ford, General Motors and Volkswagen are developing electric offerings of their own. And startups, including Lucid Motors, give investors more options to speculate on an electrified future.

Tesla seems to have put its most turbulent days behind it. That doesn’t preclude a bumpy ride for its shareholders in the future.

Superannuation is the first thought when it comes to self-funding retirement. Yet it is hardly the only option for doing so.

Just as we have a choice in how and where we work to earn a living, many people also have a choice in how to fund their retirement.

It is possible and sometimes preferable to leave your superannuation untouched, allowing it to continue growing. Some or all of your income can come from alternative sources instead.

Here are some alternatives you can consider.

1. Downsize your home

For many who own their own homes, the equity accrued over decades can eclipse the funds in superannuation. However, it’s theoretical money only until it is unlocked.

Selling up the family home and downsizing – or rightsizing – for retirement allows you to pocket those gains tax-free and simultaneously relocate to a more suitable home with lower upkeep costs.

Up to $300,000 from the proceeds can be contributed by a downsizer to boost your super, and the remainder can be used to fund living expenses or actively invested.

Remember that while the sale proceeds of your home are tax-free, any future profits or interest earned from that money will be taxable.

2. Part-time work

Semi-retirement allows you to gradually step into retirement. You continue earning income and super while working part-time, keeping a foot in the workforce while testing the waters of your new found free time.

Doing so also offers scope to move into different roles, such as passing on your skills to future generations by teaching/training others in your field of expertise, or taking employment in a new area that interests you and is closer to home.

3. Self-employment

Retirement from a full-time position presents a good opportunity to pursue self-employment. With more time and fewer commitments on your hands, you have greater scope to turn your hobby into a business or leverage your professional skills and reputation as an external consultant.

Also, for the self-employed and those with a family business, director’s loan repayments from the company are typically tax-free, offering a potentially lucrative source of

income and a means of extracting previous investments into the business without selling your ownership stake.

4. Investments

Rental property income (from residential or commercial properties) can supplement or even provide a generous source of income. The same applies to dividends from shares.

These are likely to be more profitable if you own them well before retirement.

Income that is surplus to your everyday needs can be reinvested using tax-effective strategies to grow your future returns.

5. Family trust

A family trust could be used to house investments for yourself and other relatives, building intergenerational wealth.

Trusts allow funds to be allocated to beneficiaries to manage marginal tax rates and stretch the money further, you have control over how income is split between different family members and have flexibility for changing circumstances.

6. Selling collectables

You may not realise the value of items you have collected over the years, such as wine, artwork, jewellery, vintage cars, and antiques.

Rather than have them collect dust or pay to store them, they could be sold to fund your living costs or new investments.

Where possible, avoid selling growth assets in a depressed market – wait until you can extract maximum value.

7. Obtaining a part-pension

Part-pensions are not only possible but valuable in making your superannuation stretch further. They still entitle you to a concession card with benefits in healthcare, transport, and more.

Take these savings even further by requesting pensioner discounts with other companies, on everything from utilities to travel and insurance to eating out.

Also, don’t overestimate the value of your assets as part of the means test. It’s a common mistake that can wrongly deny you a full or part-pension.

Plan ahead

However, you ultimately fund your retirement, planning is crucial. Advice would hopefully pay for itself.

Understand your spending and how those habits will change before and during retirement, then look to investments that offer the best fit.

Consider a mixture of strategies to diversify your risk, manage your tax liabilities and ensure ongoing income.

Above all, timing is key. The further ahead you plan, the more time you have to embrace additional opportunities and do things at the right time to maximise their value. You’ve worked hard and now is your chance to enjoy the fruits of your labour!

Helen Baker is a licensed Australian financial adviser and author of the new book, Money For Life: How to build financial security from firm foundations (Major Street Publishing $32.99). Find out more at www.onyourowntwofeet.com.au