Why I Did Not Buy Facebook Stock

It is always risky to say why you declined to invest in any stock, I suppose. Especially in the tech field. You always stand the risk of trying to explain later why you didn't recognize the value of an Amazon or Apple. But, here I go, with the hope that my reasoning is worth considering.

Edit: August 18, 2014. This post certainly makes me look bad, doesn’t it! Facebook did find a way to monetize its site that has been phenominal, 90% based on advertising. It may have a great future. The only warning sign now is that many people are growing a little tired of it and that younger users are beginning to go elsewhere. Who can be certain. I may have missed some income, but I will stick with my view that it is better to go with the general index funds for basic, long term needs.)

Is Facebook Viable?

First, I do not see the economic viability of a company like Facebook. The question I ask myself is, “What would I go to this site to buy?” And the answer is, “Nothing!”

People often go to Google, for example, with the very purpose of buying. And if only looking for information, at least they want something so might be encouraged to buy. People go to Facebook primarily for social reasons.

This is not to say there is no possibility for economic development. Many businesses are already using Facebook and new approaches could develop, but as of now it is hard to see where the income for Facebook seems great.

Is Facebook Durable?

Second, even though Facebook stands out now as the leading social network, they could easily be replaced. Social networking is not likely just a fad, as some suggest, but Facebook might well be.

Remember that Facebook was not the first kid on the block. They replaced others because they caught the fancy of the public in a different way than the others. Who is to say that will not happen again and this time they they will be the one to lose market share?

This suggests that even if Facebook manages to find a way to produce greater income, if their users drop off they would still not prove to be a profitable investment.

Is Facebook Dependable?

Third, Individual stocks are not a great idea in any case. I add this because I see buying any individual stock as something of a gamble.

If you read much of my site you will know that I do not particularly recommend even limited range mutual funds for a person's basic investments. If you enjoy it and want to “play the market” for fun with some extra money, fine. But for your future security I always recommend the total stock market funds and the Standard and Poor's index funds for primary investment tools.

But even if you do want to match wits with the market, I think you could do better than Facebook. Nevertheless, if you see the Facebook option differently than I do, good luck.

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