In just four days on the market, SpaceX’s stock rose over 40 percent.
Shares of the company, which debuted in the stock market on Friday, are now trading at more than $191, leading many investors on the sidelines to wonder if they, too, should jump in.
SpaceX is just one of several blockbuster initial public offerings that investors are watching this year, with I.P.O.s from the artificial intelligence start-ups Anthropic and OpenAI on the horizon. Tech and A.I.-driven stocks are continuing to see meteoric gains in a market that has already been labeled frothy, bubbly and overhyped. No one wants to join the party when it’s about to die out.
Financial advisers will tell you that investing in single stocks is always risky, and that listings that have just entered the market are even riskier. Although single stocks have moments when they surge, in the long run, they rarely outperform the general market. Advisers we spoke to said SpaceX gave them even more pause.
“This I.P.O. in particular — the fundamentals don’t seem to align to the actual underlying value of the business, and that is where your long-term returns can get the most mangled,” said Eryn Schultz, a certified financial planner and the founder of Her Personal Finance in Austin, Texas.
For those unable to avoid the fear of missing out, advisers caution not to invest more than 5 to 10 percent of your total investable net worth in a basket of single stocks. Essentially, if you’re going to buy SpaceX, make sure it’s a small slice of your investments in order to cushion a potential loss. And you don’t need to take the jump right away.
“We still have a long time, and we still have a lot of big deliverables that have been promised by SpaceX, for the stock to go, frankly, either way,” said AJ Ayers, the chief executive of Brooklyn Fi, a financial services firm.
In interviews, financial advisers offered guidance for several situations.
You’re Gen Z and Have a Higher Risk Tolerance
People in their 20s with money to invest have more time to see their portfolios evolve, but that doesn’t directly translate to allocating large chunks of money in SpaceX stock (or any single stock), financial planners said.
To Ms. Schultz, even if you’re younger, investing in SpaceX is more like a “lottery ticket” than a long-term investment.
“We know that SpaceX isn’t a profitable company right now,” she said. “It’s a huge gamble. To me, if you want to take 5 percent or less of your total invested assets, and you don’t have credit card debt, and you have an emergency fund — you’re doing the boring stuff — and you want to gamble, great.”
It’s also critical to stay wary of investing advice from social media influencers.
“A lot of people on TikTok and Instagram who are talking about financial content don’t have a ton of credentials,” said Ms. Schultz, who also creates content online.
Takeaway: If you’re young, making a bet with a small percentage of your total assets is still a gamble. But if you want to invest some money, make sure you’re on stable financial ground with debt paid off and money saved for emergencies.
You’re Hitting Those Midlife Milestones
Saving for weddings, buying a house or creating a college fund for your children are investments that benefit from patience, financial planners said.
Kelly Klingaman, a certified financial planner and the chief executive of her own financial services firm, said she would strongly advise anyone saving up for those big-ticket items against investing in a stock like SpaceX to make a fast buck.
People “might get lucky and be able to pay off their wedding really quickly with that speculation, but history usually shows the opposite,” Ms. Klingaman said. “It can create a lot of disappointment.”
Ms. Schultz echoed that point, saying house down payments and college funds should all be in “pretty boring stuff.”
“I want to hit a lot of singles,” she said. “I’m not trying to hit a home run.”
Takeaway: If you’re experiencing big milestones in life — getting married, having your first child, saving for a home — making a risky bet to quickly pay off the paired expenses doesn’t make much sense.
You’re Thinking About Retirement
The closer you are to retirement, or if you’re already there, the more careful you should be about investing your money in any single stock, planners said.
“If you’re a 75-year-old who has a million dollars which needs to last for you and your spouse for the rest of your life, and you put 50 percent of your net worth in SpaceX or a single stock, that could be devastating,” Ms. Ayers said.
If the investment goes sideways, she said, it could mean you can’t go to a nice retirement home, or it could force you to rely on Medicaid to pay for your nursing home care, or it could hurt your chances of receiving proper treatment for cancer.
“If you’re a retiree and your expenses are pretty low, and Social Security covers most of your expenses, and you’re really investing for your grandkids, you might actually be in a position where you can take on more risk because you have a paid-off house and you don’t spend that much,” Ms. Schultz said.
Takeaway: You don’t want to gamble money you need to live out the rest of your life. But if your expenses are low and you want to invest for grandchildren, you can consider taking some risks.
You May Own It Anyway
Whether or not you buy a single share of SpaceX, you may end up investing in it anyway if you have index funds. Several indexes that track sectors of the market, such as the Nasdaq-100, tweaked their rules to allow companies to join the list faster than before.
Still, because those indexes track the market more broadly, SpaceX will probably be a small portion of that investment. You can calculate how much SpaceX stock you’re about to own here.
Anyone who wants to build exposure to the A.I. industry through SpaceX, and who has investments in broad-market indexes, already has that exposure, Ms. Klingaman said. Roughly a third of the S&P 500 is made up of large tech companies like Nvidia and Apple, which are building A.I.-related products.
If you’re deciding when to buy the SpaceX stock, Ms. Klingaman said, following industry leaders, like the S&P 500, is a good rule. The index, which has been pressured to change its rules on when companies can join, won’t include SpaceX in its basket of stocks until it has proved it is profitable by agreed-upon accounting standards.
The post Should You Invest in SpaceX? Financial Advisers Weigh In. appeared first on New York Times.
