Andy Egwim won't buy SpaceX at its reported $1.75 trillion valuation, even though the company is great. A great company can still be a terrible investment if you overpay. He'd rather have a margin of safety than chase FOMO.
SpaceX's historic IPO is this Friday and is a no-no for me. SpaceX is reportedly seeking a valuation of around $1.75 trillion. That's trillion with a T. Every investing platform I use seems to keep emailing me about it, and everyone is excited. There's a lot of FOMO, fear of missing out, but I'm not buying it. It's not because I think SpaceX is a bad company or Elon Musk is not that good. It's quite the opposite. I think it could become one of the most important companies of our generation, but After 20 years of investing and teaching thousands of doctors tax-efficient investing, even writing a bestseller on investing, The Money Wise Doctor, I've learned a great company can still turn out to be a terrible investment. We've seen this movie play out again and again. When everyone is excited, when the headlines are everywhere, when the demand is through the roof, that's when investors stop asking the most important questions like, what am I actually paying for? What's the valuation? As an investor, I don't just look at the company. I look at the valuation assumptions. I am looking at what is the margin of safety. Of course, if you're a passive investor buying a broad, well-diversified index fund, you don't even have to worry about any of this debate because some of this might actually be bought for you whether you want it or not through your fund. And that's the beauty of passive investing. Now, SpaceX could prove me completely wrong and turn out to be a great investment. Maybe. Absolutely. I'm not right 100% of the time, but investing is not about predicting the future perfectly. It's about making sensible decisions when the odds are in your favor. Are you buying SpaceX? Tell me, let's chat in the comments.
