Facebook has been getting a lot more “likes” from investors recently. The company, which is now generally referred to as “Meta,” has completed a nine-month rally as of July 2023, the longest since its IPO in 2012.
Does that mean now is a good time to buy Facebook stock? Here are some things to consider before you opt to buy stock in Meta.
Is Meta a Good Stock to Buy?
Recent developments have propelled Meta into the public spotlight. These factors could make Facebook (META) an excellent buy-and-hold stock, though you may need to decide fast based on rising share prices.
Strong Performance
Meta has shown strong performance as of late — the current stock price sits at around $270 per share (and rising). That’s a 170% increase in just the last nine months, and all signs indicate that the price will continue to rise.
AI Developments
Recent developments in artificial intelligence (AI) have inspired a great deal of investor confidence. The company plans to infuse its products with AI-powered technology to improve performance and the customer experience.
Ad Revenue
The company’s revenue from online ads has also recovered, which has contributed to its recent surge. As the world prepares for the “metaverse” and Web 3.0, these online ads will likewise rise in popularity, adding to Facebook’s revenue stream.
The Risks of Meta Stock
Despite these undeniable strengths, there could be some reasons to think twice before purchasing Facebook stock.
High Prices
For one thing, the rising share price also makes Facebook stock cost-prohibitive for casual investors. That said, Meta’s price-to-earnings ratio is in line with other tech companies — the current P/E ratio is 24, and most tech stocks remain over 20.
Volatility
Concerns about volatility mean you may pay a high price today only to see the company’s stock dip in the near future.
These concerns aren’t unwarranted. The company’s “beta” (a measure of volatility) is up to 1.27. A figure of 1.0 means a volatility equal to the S&P 500 stock index. Facebook’s value indicates higher volatility, which could make the price harder to predict.
No Dividends
Facebook also pays no dividends. This might not matter to every investor, but many companies build investor loyalty by distributing small dividends to company shareholders. If you’re looking for a way to make some passive income, Facebook/Meta isn’t right for you.
How to Buy Facebook Stocks
You’ll need a clear plan if you want to invest in Facebook stock. The following steps and tips will help you make the right decisions about how to incorporate Meta into your broader investing strategy.
Set a Budget
Setting a budget is one of the most important steps in any investment strategy. Decide in advance how much you’re willing to commit to your investment portfolio and how much you intend to invest in any given stock.
Remember, never invest more than you’re prepared to lose. You don’t want to sink your family’s savings into a potentially volatile investment. And speaking of family, it’s always wise to make investment decisions together.
Consider Buying a Fund
A safe way to invest in Meta may be through a mutual fund or exchange-traded fund (ETF), especially one that follows the S&P 500. Both options give you access to a basket of stocks, which means you’ll gain built-in diversification thanks to ownership of multiple company stocks.
ETFs are a particularly popular option since they trade on the major stock exchanges, just like an individual stock. That makes them a more flexible option than other fund types. But don’t discount index funds, which are designed to match the performance of a market index and can provide reliable growth with minimal risk.
Can you buy Facebook stock outside of a fund? Of course. But buying individual stocks will always expose you to greater risk due to volatility and a lack of diversification.
Find a Broker
Can you buy stock in Facebook through an online broker or a local investment advisor? The answer is “yes” to both. Most online brokerage platforms let you buy stock in Facebook — just make sure you search for “META.”
If this is your first time buying stock, it’s important to compare brokers before making a purchase. Some charge fees when you first sign on, while others will actively manage your portfolio on your behalf, which comes with additional costs.
Choose a Buying Strategy
The most direct way to buy Facebook stocks is with a market order. With this method, you’ll simply purchase shares of stock at the current market price. However, most brokers allow you to execute various buying strategies to ensure that you make the most of your trade and don’t get sideswiped by price swings.
For instance, a buy limit order lets you set the maximum price of a stock. Your order will only be executed if the META share price drops below your threshold, helping you stick to a budget.
If you plan on buying multiple shares of stock, you can use the dollar-cost-average method. In this strategy, you’ll space out the purchase of each share over several days. This ensures that your average purchase price evens out over time and you don’t overpay for your Facebook stock shares.
Keep Track
Congratulations! At this point, you’re the proud owner of Facebook stock.
However, your investment journey is far from over. You’ll need to monitor the performance of your stock over time. This means periodically checking the share price of META’s stock and reading up on the company to evaluate its future performance.
That said, don’t panic during periods of volatility. It’s normal for any company to experience periods of highs and lows, just as it’s normal for investors to get nervous about their portfolio.
That’s why it’s important to conduct strong research and not let fear get the best of you. With careful planning and study, you can maximize your gains while minimizing your losses.
Pursue Diversification
Every investor should understand the importance of diversification.
Diversifying your portfolio means investing in companies from multiple industries (tech, healthcare, energy, etc.). If you choose to buy Facebook stock, it will help to balance your portfolio by purchasing stocks from another sector.
Again, that’s why purchasing funds can be helpful. A mutual fund or ETF brings instant diversification without forcing you to spend a fortune. That’s especially good news now that Facebook’s stock price has soared.
Bottom Line: Should You Invest in Facebook Stock?
On the one hand, Facebook stock is currently pretty pricey. Even so, investors who wait for the price to normalize could find themselves disappointed.
Granted, there’s a lot of room for volatility, but the general trend seems to be upward. Investors who want to take full advantage of the company’s recent rally may want to do so now.
On the other hand, the high price of Facebook stock may deter investors, especially those new to the game. An ETF or mutual fund may be a better way to invest in Facebook since these funds will contain additional stocks to balance your purchase.
Should you choose the fund route, you can always bring in additional shares of Facebook stock later.
Want More Stock Picks?
The best investments are made with sound data, not gut feeling. That’s why Gorilla Trades gives members access to exclusive content and stock market research tools.
Sign up for a free trial today and receive 30 days of stock picks delivered right to your inbox.