Quote:
Originally Posted by CRCRFT78
Greg, what's your take on the Facebook IPO? I don't want to get off topic but is that something a newbie should consider buying given the recent expectations of the company? Would parking say $2000 in Facebook be a good idea. I know you've explained that good growth and a decent dividend are key but how should we approach IPO as investors?
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Fantastic question.... and the answer is.... simple. It's gambling. I'm not against gambling --- provided -- that it's money you have set in the gambling bucket.
Most IPOs don't fare real well... that's the history... but when they go - they can make a guy rich. Just ask me how I know.
So how to play it. I have no idea what the right strategy will be on Facebook and I'm going to tell you right now - I made a sizable 7 figure deposit in cash yesterday in my Schwab account (the last of the sale of Isilon to EMC)... and I went to bed last night thinking about what "I" should do with this one. I'm not sure I want any part of it - and then the little man on my shoulder is saying "but Dude! What if it doubles and triples in the next three years?!?!?!"
So there is no right or wrong answer --- and the only thing I would say is that this is gambling in it's purest form. Ya plunk your money down and hope ya hit it right.
Now -- I will also add - since this is investing 102 -- that these kinds of "bets" are a good test of your intestinal fortitude. They will show you if you really think you can take risk. Everything is wonderful and the sun will shine if the stock keeps climbing -- but if 6 months out - it starts to fall... and every day you get up and you're dying the "death of a thousand cuts"... then you'll see if you can hold... because these kind of companies tend to have wild swings...
If you pull up a chart of GOOGLE (GOOG) or Chipotle Mexican Grill (CMG) and you look at those dips and the peaks... they're gut wrenching moves. Can you stand that and hold on long enough to live to talk about it and reap the reward... CMG went UP 200% and promptly fell back to even... before it took off and never looked back... Ask yourself when you would have bought and when you would have sold or hold... had you bought near the top would you have held on and watch your money go to half? Or? It's a question you can not answer - not until you're staring down the barrel of the pressure that can put on your mind.
So here's the only right answer.... only play with money you can truly afford to loose. That you just don't care about - it's not the money you were going to buy a new set of wheels with... it's not anything you're going to miss if it's gone. If you have that - then by all means - if you want to buy an IPO... go for it.
Now - if you're going to play - I'd suggest you buy HALF of what you think you can play with - sit back and see what happens - if it goes up buy a little more -- but I'd wait at LEAST for their first quarter report before committing new money. Maybe you'll miss some of the run up - but you'll have gotten some of it. But you'll also be happy and think you're pretty smart if it's gone down 40% - at which point you might want to take that other half and average down. It's BALANCE... try not to get knocked off balance. Try to curb the greed on the way up too... you'll thank yourself in the long run.