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Should you be putting EV stocks into your portfolio?

Should you be putting EV stocks into your portfolio?
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Not to be confused with E.T. (the homesick Extra-Terrestrial), EV stocks might just be the next big thing. But while the EV world is not quite an alien environment, there’s a lot yet to be understood about how they’ll perform in the coming years.

Let’s take a quick drive down this investing highway with the help of Saxo Markets, and see what may lay ahead on the road to your financial future.

What are EV stocks?

EV stands for ‘electric vehicle’. Who doesn’t love a bold acronym? 

This category of stocks has become a power unto itself after the likes of Tesla blasted off last year. Dubbed as the future of transport, this is an area trying to shake up the old smokey car industry. 

Electric vehicles are hoping to make the planet a little bit greener. The manufacturers are also hoping to make the pockets of investors a little bit fatter.

Why are EV stocks like Tesla so popular?

There’s no doubting the current popularity of stocks like Tesla. Part of this is due to the immense gains. But it’s also partly due to personal endorsement from figures like Elon Musk.

Peter Garnry, head of equity strategy at Saxo Markets, explains the glistening appeal of Musk’s Tesla for retail investors: “In many ways, Elon Musk is a great showman. He captivates his audience and he’s telling a narrative that many young people can relate to, who are both the new buyers of electric vehicles and the new class of retail investors.

“One of the reasons behind Tesla’s appeal among many investors is probably the dominance the company offers in the electric vehicle industry, which you can’t get from the traditional car manufacturers.”

What other interesting EV stocks are there?

Other than the obvious backing of the self-proclaimed ‘Technoking of Tesla‘, there’s a lot going for these stocks.

Another popular choice for investors is competitor NIO. It’s a company whose share price has also performed strongly over the last few years.

However, Garnry from Saxo Markets believes that some of the best opportunities are not the most obvious ones. He recommends looking outside the car manufacturers themselves and instead looking towards companies like battery producers. This way, you don’t need to pick the winning car-maker, giving you a better shot at success.

Should EV stocks be in my portfolio?

This will all depend on the type of investor you are. Including this category of stocks may work well in a diversified portfolio. 

If you’re a passive investor who puts money into broad index funds like the S&P 500, then you may already own some EV stocks like Tesla. 

Whether you choose to include these investments or not, making use of a top-rated stocks and shares ISA can help to reduce the tax you pay on any investments that zoom off into the territory of big gains. Just remember that the value of investments can fall as well as rise. This is even truer for an industry that is still finding its feet (or tyres).

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does is constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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