Itching to invest in Twitter? Wait a while
If you didn't participate in Twitter's initial public offering (IPO) last week, you may be thinking that you missed out on the next big thing or you blew your chance to make a killing. According to senior MarketWatch columnist Chuck Jaffee, staying away from the Twitter IPO is the best decision that any individual investor could have made last week.
According to Jaffee, in recent years IPOs have been set up to succeed even when the market itself is tanking. While this type of environment may be ideal for experienced day traders or other finance professionals, regular folks who just want to buy a few shares of an interesting company may want to stay away.
"If you're an average investor, you need to remember that the more buzz a new offering creates on Wall Street, the more individual investors get interested and excited, making it easier for the guys behind the deal to make a killing, and that if you jump into the midst of that, you're likely to be part of their slaughter," wrote Jaffee.
He also advised potential investors in Twitter and other companies with recent IPOs to think of the first day of trading like the first hundred meters of a marathon. You won't win the race that quickly, but you can lose it due to a misstep or bad decision. In addition, he suggested that anyone who wants to buy Twitter stock simply because of the company's popularity is not being wise. A company needs more than hype to be a sound investment, and you may be better off waiting on the sidelines for Twitter to prove its worth.
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