First Time Investors Who Bought Snap Are Getting Burned

It must suck to buy your first stock ever and have it go down right away. But thats what happens when you buy Snap (the company that owns Snapchat) without doing some real homework to find out whether what you are buying is a smart investment.

I assume that many millennials who had never bought any stock before were a decent percentage of those that chose to buy Snap. Caught up in the hype, they just couldn't stay away from putting their money down on a company who's future is very uncertain.

Anyone who bought Snapchat that first day paid a minimum of $24 and could have paid as much as $29 and change. And after that first day the stock has done nothing but go dow. It now sits at $20 and change which represents a minimum loss of at least 15% in one short month. Not a fun way to start out if you are a first time investor.

But this bad investment could have been avoided if only some research and thought were done:

1) The most fanatical Snapchat users are 12 to 14 year olds and they are NOT the target market most advertisers want because they don't bother looking at ads.

2) Snap itself went out of its way to classify itself as a "camera" company in the initial S-1 documents filed with the SEC. A camera company? I thought Snapchat was a social media company and their unwillingness to call themselves that might have put up a red flag or two.

3) There where dozens upon dozens of articles posted and easily found on the Internet prior to the IPO that detailed why SNAP was a lousy investment. These weren't written by suspect and unheard of websites but by many mainstream financial news outlets like Forbes, Wall Street Journal, Business Insider and others.

What I'm saying is that we have a repeat of what happened with Facebook, Twitter, and Alibaba which were each stocks that brought in a lot of novice first time investors. In Facebook's case, the stock went down initially but turned out to be a great long term investment. Twitter has been a disaster and Alibaba has turned to all right if you were willing to withstand a frightening ride down before going back up. But in each case, investors have had to weather some scary price drops.

Snapchat may or may not end up being a long term investment but with the short attention span and propensity to make frequent trades we see in today's millennials, it is doubtful that many of them will own the stock long enough to make money on it if the stock ever goes go back up.

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