I wrote this article on May 18, 2012 for my Golden Valley Patch Blog.
As a Registered Investment Advisor, and a fiduciary, it is always my duty to remind my clients of the risks involved in the purchase of any investment opportunity.
There are both good and bad elements of the initial public offering of Facebook today at $38 per share. I am not a stock analyst, so I am certainly not qualified to list the reasons to buy or the reasons not to buy the stock today.
I am qualified to disclose that even if you own a mutual fund in your Minnesota company retirement plan account that is lucky enough to be able to buy Facebook shares today; it will not save your individual company retirement plan account from the current stock market correction.
There are probably 100 to 150 stocks in the average mutual fund. Even if the price of one of those stocks would double or triple in value in one day or in one year, the price per share of the mutual fund would be hardly changed.
Regardless of the fortunes of any one single company, the price per share of a company retirement plan mutual fund is much more affected by the overall stock market environment. All stocks in all mutual funds are going to follow the overriding trend of the stock market environment.
The mutual funds in your company 401(k) retirement plan accounts are at a risk now of losing principal due to the state of the U.S. stock markets. The offering price of Facebook today, and how high the price of the stock goes in the future, does not change that investment reality.
Ric Lager
Lager & Company, Inc.
