How you can use Tesla and other growth stocks to pay down your debt

Purchasing shares in the right companies could help clear your books

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The stock market can be a cruel place. But approach it the right way and it can change your world — by providing an unexpected windfall, helping you cobble together a down payment for your first house or maybe allowing you to start a new business.

The right stock picks can also help you eliminate your debt.

It may not be the most risk-averse strategy, but putting your money behind growth stocks — shares in companies that are growing at a rapid rate — can help generate bigger returns that can then be applied to your outstanding debts.

Whether it’s by taking care of your interest costs or wiping out your debts completely, investing in stocks has the potential to provide significant financial breathing room.

The rush that comes from picking a winner isn’t so bad, either.


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High debt burdens make growth stocks an intriguing play

Canadian $100 Money

Tim Townley / Shutterstock

While many Canadians have managed their debt fairly well over the past 17 months, the pandemic has left some wondering how they’ll dig out of the hole they’ve borrowed their way into.

If you’re among those with a dark cloud of debt hanging over you, injecting a bit of risk into your investment strategy in order to gain upside might be called for.

But before you do that, be sure to reduce your overall borrowing costs by transferring high-interest debt (like credit cards) to lower interest debt (like a line of credit or a refinanced mortgage).

Then you can start chipping away at your personal debt-to-equity ratio by investing in growth stocks expected to generate returns that outpace your interest costs.


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Here are three rapidly growing companies that might help lighten your debt burden.

1. Shopify

Shopify office in Toronto

Raysonho @ Open Grid Scheduler / Wikimedia Commons

Canadian e-commerce platform Shopify has seen its share price explode 121 per cent over the past three years.

With a current price-to-earnings ratio in the high 70s, Shopify shares aren’t cheap. But this already thriving company still has plenty of upsides.

Shopify has benefited greatly from lockdowns that pushed consumers online. And it’s a trend that shouldn’t slow anytime soon.

Even at these elevated levels, Shopify’s stock continues to be supported by strong financial metrics. Its year-over-year revenue and subscription growth of 57 per cent and 70 per cent, respectively, both topped stock watchers’ expectations.


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2. Spotify Technology

iPhone displaying Spotify app

Sara Kurfeß / Unsplash

Spotify Technology is another growth stock that might be worth paying attention to.

The Swedish music streaming platform saw its total revenue increase 23 per cent year over year in the second quarter of 2020. The drivers were significant growth in the number of premium subscribers and advertising revenue.

Spotify hasn’t experienced the same breathless run-up that Shopify enjoyed this year — in fact, its shares are down 21 per cent over the past 52 weeks and have fallen 35 per cent since the start of 2021.

But with Spotify being the biggest name in music streaming, the company is well positioned to be one of the key players in digital music distribution and should be able to grow its user base as it steadily benefits from long-term network effects.


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It might be worth buying on the dip.

3. Tesla

Tesla store

Milan Csizmadia / Unsplash

Despite Tesla CEO Elon Musk’s knack for generating controversy, shares in the electric vehicle manufacturer have fared well over the past year, posting an impressive gain of 81 per cent.

With most countries pledging to be carbon-neutral by 2050, widely available electric vehicles will be critical to meeting those ambitious environmental goals.

But it’s not just electric vehicles that will boost Tesla’s returns. The company also sells highly scalable products like solar panels and batteries, putting it in an ideal position as the clean energy space expands.

Find an investment vehicle that works for you

Man investing and checking stocks on computer

Chris Liverani / Unsplash

It’s important to remember that the stock market, as strong as it’s been this year, is not a sure thing.


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Needless to say, if your budget already doesn’t have room in it, trying to stretch it with stock purchases is not in your best interest.

That said, if you do have a modest investing budget to work with, you may want to use an investing app that allows you to buy “slices” of shares for companies like Tesla — especially one that comes with no fees or commissions.

Another low-budget option is using an app that allows you to invest with just your “spare change” by rounding up to the nearest dollar on all your purchases to help you build a diversified portfolio over time.

For those with a bit more cash to spare, working with a robo-advisor can help you build a portfolio that’s compatible with your risk tolerance and grows alongside your financial situation.

This article was created by Wise Publishing. Wise is devoted to providing information that helps readers navigate the complex landscape of personal finance. Wise only partners with brands it trusts and believes may be helpful to the reader. This article provides information only and should not be construed as advice. It is provided without warranty of any kind.



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