Don’t Let FOMO Cost You a Fortune: The Investing Mistake Many Are Making With SpaceX’s IPO

Trying to make the most of don let fomo cost? You are in the right place. Below we break it down in plain English, with practical tips you can actually use.

Key Takeaways

• FOMO, the fear of missing out, is one of the most expensive forces in investing, and few things set it off like a giant, hyped initial publi...
• The SpaceX debut is the latest one to test it.
• SpaceX went public on June 12, and the run was hard to look away from.

FOMO, the fear of missing out, is one of the most expensive forces in investing, and few things set it off like a giant, hyped initial public offering (IPO). The SpaceX debut is the latest one to test it.

SpaceX went public on June 12, and the run was hard to look away from. The stock initially priced at $135, popped to a $161 close on its first day, and kept climbing the following week. Brokerage apps that never carried the shares suddenly showed a “request shares” button, and individual investors bought more SpaceX than any other stock in the market.

If watching that made you feel like you had to get in before the chance disappeared, that’s FOMO, and it pushes people into worse decisions than almost any market crash does.

The Trap of “What if I Had Just Bought It at the IPO”

Let’s look at a couple of other examples:

• A $1,000 stake in Amazon at its 1997 IPO would be worth millions today.
• A $1,000 stake in Tesla at its 2010 IPO would be worth roughly $250,000 today.

Run those numbers and the takeaway seems obvious. Spot the world-changing company, purchase at the start, and get rich. The trouble is that it only looks obvious now. None of it was clear at the time.

When Amazon went public, it was an online bookstore losing money, and after the dot-com bubble burst its stock fell about 90%. Critics nicknamed it “Amazon.bomb,” and plenty of smart people assumed it would not survive.

Tesla spent years as one of the most bet-against stocks on the market and came close to running out of cash more than once.

Holding any of these from the start meant sitting through long stretches where the smart-sounding view was that you had made a mistake.

You know how those stories ended because you’re standing in the future looking back. The person buying at the IPO had no such advantage.

For Every Tesla, There’s a Rivian

The hyped, can’t-miss IPOs that flamed out far outnumber the ones that paid off, and at the time, they looked just as promising. Most people just forget the failures. That’s known as survivorship bias: We remember the handful of spectacular winners and ignore the much larger number of companies that never lived up to the hype.

Rivian went public in 2021 in one of the largest IPOs in U.S. history, and within days, the electric truck maker was worth more than Ford, a company that had been building cars for over a century. Then it fell close to 90%. At its IPO, Rivian looked like it might be the next Tesla. It wasn’t, and anyone who bought the hype on day one is still deep underwater.

Rivian isn’t an isolated example. Investors have watched similar stories play out with companies ranging from Pets.com and Webvan during the dot-com era to more recent disappointments like Blue Apron, Peloton and WeWork. In each case, excitement about the future proved far easier than delivering it.

A Excellent Company Is Not the Same as a Excellent Investment

SpaceX is a real business with real revenue and a commanding position in rocket launches and satellite internet. There’s nothing wrong with buying a piece of it. An IPO is a normal way to invest, and plenty of people come out fine.

But it isn’t a guarantee. The offering cost was set for a reason: bankers and large investors spent weeks sizing up the company, and even they don’t know what happens next.

This one carries an added risk. SpaceX was priced at $135 and is already trading well above that. Buying today means paying more than the number the deal was carefully set at, after a week of momentum and headlines, which means investors today are paying a much higher cost than those who bought at the offering.

The company lost nearly $5 billion last year and went public with a valuation exceeding $2 trillion. At least one analyst opened coverage with a sell rating and a target below the IPO cost. You can love the rockets and still see that a stock priced for a flawless future leaves almost no room for error.

FOMO Isn’t Only About IPOs

The same pull shows up any time a cost is running up and the crowd is loud. Lately, it’s been the tech stock boom, gold, and crypto , all climbing while everyone seems to be talking about the money being made. Before that, it was meme stocks like GameStop, and before that, anything with a dot-com in its name.

FOMO doesn’t hit early, when a cost is low and nobody is paying attention. It hits after the run, once the gains are in the headlines and the people around you are bragging about them. By the time the fear is strong enough to act on, most of the buyers who were going to pile in already have. That’s what makes it FOMO, and it’s what makes it dangerous. You aren’t getting in early. You’re getting in late, into a crowd, near the top.

Final Thoughts: What To Do Instead

The boring approach is the one that has built wealth for ordinary people for decades. Money expert Clark Howard’s long-standing advice has been to skip individual stock picking and put your money in low-cost index funds that hold the whole market. Add to that fund on a regular schedule and leave it alone. You already own a slice of every major company that way, including the ones that go public to excellent fanfare, without staking your savings on a single name during its loudest week.

If you want a piece of SpaceX or the next hot debut, there’s nothing wrong with that. Just keep it small. A reasonable rule is to limit speculative bets to a low single-digit share of your portfolio, an amount you could watch fall by half without it changing your life. That lets you take part without putting your future on the line.

The post Don’t Let FOMO Cost You a Fortune: The Investing Mistake Numerous Are Making With SpaceX’s IPO appeared first on Clark Howard.

Final Thoughts

Before you check out, double-check don let fomo cost against current offers and any coupons you can stack. Small habits like this add up to real savings over a year.

Originally published at clark.com.