Building a budget, buying an IPO, and watching out for bears
New Budgeting Tool
When working with new investors the first step is often to develop a budget so that they can make sure they are saving at least 15% of their income. Derek recently created an online budgeting tool that is available on our website.
What I like about the budgeting tool is it works in real time. You can make immediate changes to your expenses and savings to see the impact. Additionally, the budgeting tool will make recommendations and observations based on what you put in it. It does not require names or specific financial information and what you put into it is not stored or shared. All of your information is cleared when you leave our website, but you can download a report for your personal use, if you'd like. I'm looking forward to hearing what you think about this tool.
Should I buy an IPO?
IPO stands for initial public offering. This is when a private company first becomes public and stock shares are offered to retail investors like you and me. As a general rule Crosby Advisory Group does not recommend buying an IPO. History has shown that if you really want to own the company, the odds are you can get a better entry point if you are patient. If we look at the last few big-name IPOs that came to market, they could have been purchased at a discount to their initial public offering. SpaceX is the most recent example. As I’m typing this email shares are trading around $115. Many retail investors who bought it on day one paid around $150 per share. The structure of an IPO often puts the retail investor at a disadvantage. Insiders of the company already have their shares. Investment banks are then given the role as intermediaries between retail investors and the IPO company. Their job is to underwrite the valuation of the company and market the shares to potential investors. SpaceX was possibly the greatest marketing job I have ever seen. They created a frenzy among interested investors who trampled each other to bid shares higher. In the days following the IPO shares were bid up over $200 per share only to come crashing down below the opening day price. The SpaceX IPO was not an anomaly. Facebook shares fell 45% within 3 months of IPO and Robinhood shares fell 64%. Apple stock could have been purchased at or below IPO price years after its initial stock offering. As a general rule, Crosby Advisory Group recommends waiting to see a few quarters of earnings before making a purchase. To make significant money on Amazon, Apple, Google, or Nvidia one did not have to own them on day one. If you have questions about this, please don't hesitate to give our office a call.
Northern Trek
In June my wife and I went hiking in Banff, Canada. That time of year they close down main highways to protect animals with young offspring. We rented e-bikes and rode on highways and back trails to our hiking destinations. Along the way we saw bear, elk and mountain goats. On one trip to a hike my wife was taking in the scenery and failed to notice a bear up ahead. I frantically called out her name and told her to stop. We will thankfully never know but as far as she is concerned, I saved her life and will likely keep my heroic action in my back pocket for a day that I do something wrong. Remember, I risk-manage for a living!
Dynamic Growth
In our most recent episode, Derek and I talk about our best practices and worst mistakes we've made as investors. If you are interested, you can listen to it here or subscribe to Dynamic Growth wherever you get podcasts.
Disclaimer: Crosby Advisory Group, LLC is a registered investment advisor. This newsletter is for informational purposes and does not reflect direct investment or tax advice. Investing involves risk including the potential loss of principal. Not all investments are suitable for all people. Crosby Advisory Group, LLC has ownership interest in NMD Insurance Agency and CAG Marketing.
