Elon Musk's Investment Strategy

Elon Musk, by many metrics the most successful entrepreneur of modern times, had a net worth of some $216 billion as of October 2022. Earlier in the year, his net worth almost topped $300 billion before Tesla (TSLA 12.06%) stock started to fall from all-time highs along with the rest of the market.

A natural question among investors is where Musk chooses to invest his money. Let’s take a look at the investments Musk owns (and the businesses he starts), the type of investments he avoids, and what investors should know about his strategy.

Investment strategy

Elon Musk's investment strategy

Elon Musk's investment strategy is rather simple, at least as far as he's made public. His investments can be divided into two general categories -- companies he started or controls and cryptocurrencies. Unlike many other billionaires, Musk doesn't have a large portfolio of publicly traded stocks of companies where he doesn't have day-to-day involvement.

That changed after it was revealed Musk took a 9.2% stake in social media platform Twitter (NYSE:TWTR) in early April 2022. Twitter’s market cap was just shy of $31 billion, so his stake is a small percentage of his overall net worth. He is currently Twitter’s largest shareholder.

A day after the stock purchase was revealed, Musk was offered a seat on Twitter’s board of directors. That offer was rejected since he then offered to buy the company and take it private for $44 billion. There was been ample back-and-forth between the company and Musk over how many bots (accounts that aren’t a real person) are on Twitter, among other issues. The deal has since gone through, with Musk becoming "Chief Twit" of Twitter in late October 2022.

Musk has said his top initiatives include promoting free speech, publicly displaying the algorithms governing content, and transforming Twitter into an "everything app" called X.

Twitter aside, Musk’s investments are highly concentrated in his entrepreneurial endeavors. The first category comprises publicly traded stock investments, and the second includes private companies that he founded and where he continues to have an investment. With that in mind, here's a breakdown of what we know about Musk's investments.

Publicly traded stock investments

Elon Musk’s publicly traded stock investments

Besides Twitter, the only other major publicly traded stock holding Elon Musk owns is electric vehicle giant Tesla. Musk was an early investor, having led the Series A funding round, and he was one of the company’s first employees. Musk accumulated a majority stake and took control of the company in 2008.

As of October 2022, Musk owned slightly more than 14% of the company, worth more than $100 billion. He also has a compensation package from Tesla that pays him exclusively in company stock, so his ownership could certainly increase over time. In fact, even after selling and giving away almost $22 billion of Tesla stock in late 2021, Musk’s stake in the leading EV manufacturer still increased because of stock options.

Thanks to a 10-year compensation package Tesla’s board approved in 2018, Musk's only compensation is through performance-based tranches of stock options each year. He's already reached the most aggressive goal (a $650 billion market cap by 2028), so at each of the vesting dates, Musk will receive options to buy 8.44 million additional shares at very low prices (assuming Tesla's market cap remains over that threshold).

It's worth noting that Musk was a co-founder of X.com, which ultimately became PayPal (PYPL 0.64%) in the dot-com boom era. He was CEO of PayPal until 2000 and owned almost 12% of the company's shares at one point. However, he no longer has a stake in PayPal, although he owned shares before the company was acquired by eBay (EBAY -0.14%) in 2002. He received more than $100 million for his stake after cashing out. Today, Musk's PayPal stake would be worth billions, but since he used the proceeds to fund both Tesla and SpaceX in their early days, it's tough to make the case that cashing out was a bad move.

Private equity

Elon Musk’s private equity

Musk founded and still controls several companies, but SpaceX is by far the largest. He owns about 44% of the space exploration technology company, which was valued at roughly $127 billion in a May 2022 funding round.

With a combined value of almost $200 billion, Musk's Tesla and SpaceX stakes make up the vast majority of his net worth. He often describes himself as "cash poor" since most of his wealth is tied up in his businesses.

In addition to SpaceX, Musk also has majority ownership of several other privately owned start-ups he founded or co-founded. For example, he owns most of tunnel engineering company The Boring Company, neurotechnology start-up Neuralink, and artificial intelligence research operation OpenAI.

Cryptocurrency investments

Elon Musk’s cryptocurrency investments

Although we don't know the exact amounts he owns, we do know that Musk is a cryptocurrency investor -- both through the companies he controls and personally. He has been quite outspoken about some of his favorite digital assets, particularly Dogecoin (DOGE -7.62%).

Musk also has revealed that he owns Bitcoin (BTC -3.5%) and Ethereum (ETH -2.71%), although he has said the Bitcoin he owns is worth much more than the Ethereum or Doge that he owns. Tesla and SpaceX both own significant amounts of Bitcoin, too. Although we know Tesla owns about 42,000 Bitcoins (worth about $1.3 billion in June 2022), we don't know how much of any cryptocurrencies Musk personally owns.

Stocks he doesn’t buy

Stocks Elon Musk doesn’t buy

While we don't know every single detail about Musk's investment portfolio, we do know that the bulk of his stock holdings are in both public and private companies he controls. He doesn't own any well-known stock positions in other businesses.

However, we should put a big asterisk on this. Musk isn't a hedge fund manager and isn't required to disclose relatively small investments. It's entirely possible that he has small investments in publicly traded stocks that we don't know about.

Investing like Elon

How you can invest like Elon Musk

If you want to invest like Elon Musk, the first thing you should do is to buy shares of Tesla stock since it makes up the vast majority of the billionaire's net worth.

Obviously the private equity side of his portfolio is a roadblock. You can't simply buy shares of SpaceX or The Boring Company on the public market, and most people aren't able to participate in funding rounds for those businesses. The next best thing you can do would be to find publicly traded companies with a similar focus. For example, many investors have called Rocket Lab USA (RKLB 0.27%) the closest thing to SpaceX on the public markets.

Finally, while it would be easy enough to follow Musk into cryptocurrencies, there's one big thing to keep in mind. As someone with literally billions of dollars in assets, Musk's risk tolerance dynamics are much different than yours. In fact, his goals are likely less about balancing investment growth and risk management and more about building businesses that align with his personal goals and image.

In other words, Musk could lose $1 billion on Dogecoin tomorrow and still be incredibly wealthy. Remember that you (probably) can’t afford to lose $1 billion before pulling the trigger on a cryptocurrency investment or any other type of investment just because a rich and/or famous investor has bought it. Even Musk himself has advised investors not to put too much of their money into crypto.

The bottom line is that although Elon Musk is very wealthy, most of his net worth is tied up in a single stock (Tesla, and, more recently, a small stake in Twitter) and private companies that you or I likely cannot invest in. Besides buying Tesla stock, if you want to invest like Elon Musk, becoming an entrepreneur might be the best way to go about emulating his style.