Sitting on $5,000—should it go with Elon Musk or Warren Buffett?

If you’re a relatively new investor who’s looking to put your first $5,000 to work, it can be tempting to follow the “exciting” plays that your friends may have already made big money on. Indeed, betting on Elon Musk by scooping up shares of Tesla (NASDAQ:TSLA) may seem like a wise idea, given the robotaxi opportunity, battery innovations, and the rise of the Optimus humanoid robot.

Indeed, investing in Elon Musk has been a winning bet in recent years. That said, even the most innovative of firms can be a poor bet moving forward if you don’t buy shares at a reasonable valuation. Indeed, valuation can make the best companies a poor investment and vice-versa!

That’s why investors should pay careful attention to the price they’ll pay for exposure to the electric vehicle (EV) titan, especially after a massive past-year run. For those who’d rather not be on the cutting edge of AI and other innovations, perhaps a slow, steady, wide-moat approach from Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) would be a tad more fitting.

Let’s check whether Tesla or Berkshire would be a better “first stock” for market newcomers with a few thousand to put to work.

The case for Elon Musk’s Tesla

Tesla has a lot of potential growth drivers brewing that could continue to support the share price. More recently, though, investors have been souring on the stock, with TSLA now down around 26% from its all-time high close to $480 per share.

Indeed, the dip may be tempting for market newcomers who believe in Musk and his ability to continue delivering for investors. With the AI boom continuing, it will be interesting to see new products coming from the Tesla pipeline. In spite of the many growth drivers and proven visionary leader in Musk running the show, there is a degree of political risk now tied to the stock, given Musk’s role in DOGE (the Department of Government Efficiency).

Despite these newfound risks, though, Wedbush Securities’ Dan Ives views the EV maker as a “golden goose” poised to seize the $1 trillion opportunity in autonomous driving. Given Ives’ track record of calls, I think there’s a chance he could be right. Though I find Tesla stock (and most other disruptive innovators) tough to value, I would fasten your seatbelt if you go with Musk’s Tesla at these levels. The 2.3 beta makes for a very turbulent ride. If you’re keen on Musk and are willing to ride it out, TSLA stock could be your horse to bet on.

The case for Warren Buffett’s Berkshire Hathaway

Buffett’s Berkshire could be a better starter stock for investors looking to learn the ropes in the investing world with cash flow-generative businesses and “value” (instead of growth) at the very top of mind. The diversified insurance and holding company provides a great deal of diversification; though not comparable to the S&P 500, Berkshire shares stand out as a perfect pick to form the bedrock of any portfolio.

Indeed, Warren Buffett has a lot of wisdom to share with all sorts of investors, new and seasoned, young and old. Whether you opt to pick up a few class-B shares, tune into the annual Berkshire Hathaway shareholder meetings, or read the many books that study his teachings, you’re setting your investment knowledge foundation well by studying the Oracle of Omaha himself, which topped markets for numerous decades. 

More recently, however, Berkshire shares have had a tougher time topping the S&P 500 by a wide margin. Indeed, Berkshire is a $1 trillion company now. And it’s become harder to keep crushing markets, especially when there is a lack of sizeable acquisition opportunities out there. While Tesla may be a more exciting bet, I must say I’m a bigger fan of the lower beta (0.87) and valuation at current levels. If you’re not yet ready to face one of the more volatile stocks in Tesla, perhaps Buffett could be the guide to go with.

The bottom line

Elon Musk once expressed his belief that “moats are lame.” And that what matters more is the pace of innovation. For those in that camp who seek a higher upside potential at the cost of a rougher ride, perhaps TSLA stock is the stock to go for.

For investors seeking to dip their toes into the stock market slowly, Buffett’s Berkshire may be a bet that allows one to sleep easier.

With numerous low-tech businesses, ranging from GEICO to See’s Candies to Fruit of the Loom and BNSF Railway, and a value-focused approach to stock selection, you’re getting a lot of steady, well-run businesses from one single stock. Given how heated the tech scene has been in recent years, I’d give Berkshire the edge for new investors, given it’ll likely fare better should tech drag down the entire market. 

Perhaps going with Tesla and Berkshire Hathaway could make sense if you’re looking to invest in and learn from both men who are among the most influential in the business world.

The post Sitting on $5,000—should it go with Elon Musk or Warren Buffett? appeared first on 24/7 Wall St..