Behavioral Investing - Revisiting Facebook (aka Facebook Psychology)

  • Posted on: 9 December 2015
  • By: admin

The following is an excerpt from our recent research piece "Behavioral Investing - Revisiting Facebook (aka Facebook Psychology)"  The full report can be found here:

Every so often, we like to focus on investor psychology and how it impacts investor decisions and behavior—usually for the worse.  Individual investors, unfortunately, have to struggle with fear and anxiety when it comes to their money.  It typically doesn’t feel good to invest your money in a struggling enterprise whose stock price won’t stop sinking.  Conversely, it typically feels great to pile money into an investment that is trumpeted on CNBC or by your friends. Regrettably, these actions can negatively impact long-term investment performance.

In this piece, we want to focus on Facebook, ticker FB.  During the hype leading up to the Facebook IPO, we were so tired of hearing about Facebook that we’re shocked we had the stomach to bring it up again.  But Facebook is a classic example of some of the worst parts of investor psychology, and it pays to learn from mistakes.  A little over a year since the Facebook IPO, shares have been on a roller coaster but have nudged back up to the IPO price.  Unfortunately, many of the Facebook believers from the IPO likely sold their shares for a loss in the interim.