In order to produce the podcast and keep content up free for you, I work with partners so this post may contain affiliate links. Please read my full disclosure for more info.
As you've probably heard, Facebook will begin trading on Nasdaq this morning. From all the media coverage, it certainly looks like it'll be a big splash today with Facebook offering to 421 million shares.
It looks like many ‘regular' investors are looking to jump in and invest. That might not be a good idea, believe it or not.
Small Investors – Harder to Get a Deal
When I checked yesterday, it appears that Facebook will be pricing their shares around $38. While that amount seems within the budget for individual investors, it's unlikely many investor can grab it at that price. The price is expected to surge on opening day, as people rush to snag a deal.
Is Now the Time to Invest in Facebook?
How you invest your money is your choice of course. However you owe it to yourself to evaluate your decisions. If you're planning to buy Facebook shares this morning, please ask yourself a few questions.
Is this a part of your long term investment strategy or is it just excitement about the hype?
You have to adjust and tailor your portfolio to fit your needs. How would Facebook be a part of your overall plan?
Is your portfolio diversified and this another piece to the puzzle or are you putting it on all (or a big portion) of you money into Facebook?
Do you have numbers and objective reasons to back up your investment or is it merely a flip the stock opportunity?
If you're thinking about buying the stock and then selling it for a tidy profit, you may want to reconsider. Forbes shared the results from a study that SigFig did regarding IPOs for companies like LinkedIn, Groupon, Zynga,and Yelp:
SigFig found that the majority of investors who tried to flip the stock on IPO day did so at a loss. The vast majority of people who bought stock in these tech companies on IPO days have sold, the data show, and only investors in Jive averaged a positive return.
In fact with Zynga, shares closed below its offering price. That doesn't mean that you should invest in a tech company if you believe in its long term prospects, it just means you may have to wait to see the big returns you're hoping for.
What makes this IPO different from Groupon or Zynga?
The last question isn't so much focused on pulling out financial records and comparing business models (though it's not bad), it's really about how familiar are you with Facebook as an investment versus the hype you hear from media and others.
By the way, if you're looking at the numbers for tech IPOs, here is an infographic from SigFig:
Your Thoughts on Investing
I'd like to hear from you and get your thoughts on the Facebook IPO. Are you buying Facbook stock today? Why or why not? What's your investment strategy?