Thursday, February 9, 2012

My Thoughts on...The Facebook IPO

A lot’s been made just about everywhere you turn regarding the most anticipated IPO launch this century, so I find it fitting to add my two cents to the discussion. Essentially I have a love/hate relationship type of viewpoint with “liking” the facebook IPO. The euphoric frenzy that has pumped up the masses has artificially instilled consumer confidence into the market in general. Specifically, the tech industry has seen a nice broad lift in the past few weeks since news went out over the wires of all happenings related to facebook. So on a broad macro level, I appreciate the frenzied lift of a lot of sectors across the board with the increase in investor confidence. What I absolutely hate about this is that it will be another instance of single stock pickers swinging for the fences rather than investing for long-term growth.

If you’ve been following my musings you know how I feel about single-stocks in general. They quickly go up and down, and neither you nor I have the expertise or research at hand to anticipate who the next Microsoft, Wal-Mart or Apple is going to be. You’ll lose your tail chasing after smoke and mirrors. I advocate investing in solid mutual funds and PARKING your hard earned money there for at least five years to ride out market cycles. Solid mutual funds, that have been around for at least 10 years and have average annualized returns of greater than 12% since inception, have proven themselves through various cycles, provide diversification across many companies and industries and over time curb-stomp inflation and taxes with their growth.

But back to the facebook IPO…I feel that the overall spirit of wanting to get in on the IPO, is for get rich quick swing for the fences home-run style investing that can single-handedly (IF IT GOES WELL erase a life-time of stupid investment choices. I have not found one article, belief or commentary suggesting that facebook will be a sound investment choice over the course of one’s lifetime. This entire thing is the epitome of our A.D.D culture.

Look, we work too hard for our money to gamble on something that may or may not be there. Your money, investments and financial future deserve better than chasing a dream. Although Dave Ramsey says (if you absolutely have to) invest in single stocks, do not let them exceed more than 10% of your portfolio as a group, I personally do not own a single, single-stock. I want my money invested in something that has proven itself through bull and bear markets and has proven results and returns. Even if I were to consider buying facebook stock, my same principles would apply. Let’s see how it fares 10 years from its IPO launch date and once (its trading life) is out of diapers, I’ll consider whether its continued growth and value is worthy of my hard earned dollars and sense. My advice: Invest for long-term growth and value, not hype.  

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