Here's Why You Shouldn't Invest in Twitter
By FARHAD MANJOO CONNECT
Nov. 6, 2013 7:30 p.m. ET
Twitter Inc.'s rise has been a remarkable story. Both because it was beset by chaos (see Nick Bilton's new book for the operatic details) and because, despite the chaos, Twitter has somehow managed to become a legitimate, even straitlaced business, its IPO is a good time to congratulate the firm on its unlikely success.
But it isn't a good time to invest in Twitter when it starts trading Thursday. Here are three reasons to sit this one out:
Don't invest in individual stocks. Especially don't invest in tech IPOs. This isn't tech advice, just widely accepted financial wisdom for normal, non-professional, non-gambling investors: Buy index funds and forget about picking. And, really, it's the first and the last reason for you to stay away from TWTR. If you're no expert, don't pit yourself against the experts.
Tech IPOs are governed by mass hysteria—not rational assessment. Getty Images
Right now, there are hundreds of stock analysts, market researchers, advertising gurus and other people who are being paid vast sums to determine whether and how much to invest in Twitter. Going up against them is a loser's game, and you shouldn't play.
This is true of all stocks and isn't specific to Twitter. But there's a special danger in IPOs, especially big-name tech IPOs, which are governed more by mass hysteria than any kind of rational assessment of long-term potential.
If you think Twitter is going to be a successful company, that will be true three, six, and nine months from now, too. There's no reason to join to the IPO bandwagon other than to indulge a day-trader's fetish for a quick pop.
…But say you buck these warnings and are fine with gambling on individual stocks? Here are more reasons not to invest in Twitter specifically: