Dear America, please stop being lemmings when it comes to investing, make informed decisions, and stick to your guns!
Welcome to America, land of instant gratification! Apparently, after a coma induced by the hyped up IPO of Facebook, the brilliant investors on wall street as well as the average joes in their living rooms are now kicking themselves in the butts for investing in Facebook. I mean, who on EARTH would take a bet on the largest social media site to have existed!?
The share prices of Facebook have fallen, and yes even showing double-digit percentage drops (approx 10%), however who buys into an IPO and expects to sell the next day? Investing is taking a bet on a company’s success, and people cannot be skittish on Facebook’s first real day of market trading.
Some of the biggest critiques of Facebook is “how profitable is it”. Facebook is in a similar situation at Google was when it first emerged as a major company. For Google, the concept of online advertising was in its infancy and many considered online advertising to not be a viable source to generate business. Facebook has a leg up in this respects because it has a proven advertising structure and it will only continue to become more effective…not to mention the millions of users who can easily be targeted by advertisers based on demographics. Think about how incredibly easy it is to find a target audience on Facebook based on age, sex, groups, likes, etc. Advertisers have their target audience served on a silver platter…and this is something that has been established as a profitable source of revenue by Google.
When Google first went public it took a dip in the first month, from approx $108 down to $100 (an 8% drop). Seven years later, if you bought it at $108 you would have made a 566% profit. If you purchased it at $100, make it a 612% profit. Yes there is a significant difference between those profits. However, how many of the investors who bought Google at $108 and sold at $100 bought it back before the major price increases the company’s shares had? If nothing else, if an investor bought Google at $108 then they should be willing to have paid $100 for the Company and reaped even greater benefits.
For those of you who bought Facebook after the IPO and are considering selling, ask yourself “why did I even get involved in this company”. If the answer was to make a quick buck, well it’s too late for that. However if you stick it out, and Facebook continues to be a success and forms a way to increase revenue for each user by improving advertising and paid services…then in 5 years you will able to brag to your friends about how you go in on the “ground level”.
As Warren Buffett said “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful”.
I want to make sure that the reader understands that I myself own several shares of Facebook. That being said, above is the reason why I am not selling facebook and if anything buying even more.