Should Small Investors Hate the Stock Market?

The guy from Baton Rouge apparently included the Facebook buy as part of his self-directed retirement account. The lady from California wanted to be part of a monumental occasion. In that regard, we share some similarities.

Controlled Enthusiasm

I expect Facebook to play a role in my retirement account. And I could not resist buying the stock shortly after it became available to the public. That's where the likeness ends. I purchased three shares of FB on IPO day. I still hold the same three shares.

I am quite bullish on Facebook the company. Same goes for Mark Zuckerberg the CEO. I do not intend to touch the stock (beyond my souvenir lot), however, until it trades considerably lower than its offering price and probably much lower than where it is now.

I took a different path with the IPO than the guy in Baton Rouge and the lady in Granite Bay. That's because I have a better idea of how to organize and maintain a long-term portfolio of investments. And I better have. I spend practically every waking moment following and obsessing over the stock market.

Mere mortals like us should rarely (maybe never) buy -- with money we would rather not lose -- an IPO on day one. Let it ride and slide. Check back in three to six months to see if the bullish story you told yourself three to six months ago remains intact. Beyond that little bit of excitement, stay the course.

I keep about 70% of my portfolio in pretty big growth companies that dominate or have the potential to lead their spaces. Most of them pay dividends. I scale into each position with as little as $50 a month and, often, much more than that. I reinvest all dividend and covered call income.

That's not sexy so, of course, without a good financial adviser or some form of self-education, you cannot expect the average person who dove headfirst into the Facebook IPO to understand that strategy, let alone know how to execute it. That's like expecting me to back an 18-wheeler into a loading dock with no prior simulation or real-world experience.

The Market Is Not the Enemy

Investors who got duped by the Facebook IPO did not get duped by Facebook. Morgan Stanley(MS) did not take them for a ride. They should not hate the stock market because of their unfortunate experience.

They should direct their anger toward the critics who cannot stop with the Facebook hate. Often, these are the same people who finger Facebook, Morgan Stanley, Nasdaq and the IPO process as the culprits for scaring new investors away from the market.