Prudence not Prognostication

According to the Wall Street Journal, 21 of Fidelity’s Mutual Funds dumped nearly two million Facebook shares in June, less than two months after this “IPO (Initial Public Offering) of the Century” went public. Over that brief period of time, this wildly anticipated and super-hyped stock plummeted to almost half of its original price.

Do we own, or did we own Facebook shares in any of our investment portfolios? The answer is a resounding NO! As with any new public offering, Facebook does not meet the screening criteria of Dimensional Fund Advisors (DFA), the primary investment company we use in the development of our portfolios. To put it simply, at this stage of its corporate life, Facebook is just too risky for too many of our clients.

Now, if Facebook had met DFA’s screening criteria, it would have been just one of almost 13,000 unique holdings spread over 45 countries. Also while adhering to our passively managed philosophy, it would be held for long term growth and not for trying to turn a quick buck. Participating in an IPO would be stock picking which we feel is akin to gambling and of course no one loses in Vegas….right?

Back in May of this year, just one day before Facebook went public, we asked in our “Weekly Clarity Coaching” whether or not it was a good idea to buy Facebook. We wrote that it depends on your objective:

“If you want to gamble and speculate with your money, you may want to take a chance. But you have got to be prepared to take a loss – perhaps a sizable loss – if you are unlucky and the share price falls. However, if you are serious about investing and you want to avoid gambling and speculating, buying individual shares of Facebook is something that we would not recommend.”

Take a look at this link to a 1 1/2 minute Video discussing Fidelity’s current relationship with Facebook.!5B93D00A-4306-4B70-ABA4-F2D3DEDC7135

About Paul Nichols

Paul is the founder of Financial Abundance, a Registered Investor Advisory firm and EDI, an Estate Planning Firm with offices in State College and Lewisburg. He has been working with individuals, families and businesses for over twenty years, including many Fortune 500 companies. He has educated tens of thousands of people through seminars, workshops and various international speaking engagements where he shared the stage with many notable individuals such as Ronald Reagan, Robert Kiyosaki (author of Rich Dad, Poor Dad), Mike Ditka, General Schwarzkopf, and Newt Gingrich to name a few.

In 2000, after many years of traveling to consult companies and individuals, Paul decided to relocate from Colorado to State College, PA (his wife’s hometown) to develop a local advisory firm.

Paul operates under the core belief that education plus understanding leads to clarity and confidence; resulting in peace of mind. He is a proud father of three and devoted husband of 20 plus years.

Some of Paul’s accomplishments:
Regular contributor to the Centre Daily Times, via the “It’s Your Money” blog
Featured in the movie Navigating the Fog of Investing
Regular contributor to Town & Gown as the publications Investor Coach
Host of the weekly iTunes Podcast, It’s Your Money
Member of the Western PA Better Business Bureau
Member of the Centre County Chamber of Business and Industry