Hannah Erin Lang at The Wall Street Journal wrote about the retail investors lining up for the SpaceX IPO, an offering expected to raise close to $75 billion and one that Elon Musk is counting on an army of loyal individual buyers to support. She asked me what I am hearing from clients.
Most of the interest is emotional. People want to own a piece of Elon Musk's rocket company. I understand the pull, and there is nothing wrong with liking a company. The trouble starts when excitement is the whole plan.
Here is what tends to happen next. Someone buys on enthusiasm, never decides how big the position should be, and then finds out their real comfort level the hard way when the price swings, which a newly public, unprofitable company priced above a trillion dollars will do. At that point the decision gets made by fear instead of by plan.
The fix is unglamorous. Before you buy a stock like this, pick the maximum share of your portfolio you will let it become, and hold yourself to it. For most households that number is low single digits. You cannot control what the stock does. You can control how much of your future rides on it.
Wanting in is fine. Not deciding in advance how much is the mistake.
Read the full article at Wall Street Journal →
