Should You Invest in Visa?
Categories: Investing
No Debt Plan is a blog about living a debt-free life. If you're new here, you may want to subscribe to my RSS feed (e-mail subscription also available). Learn more about me, or some of my most popular posts. Thanks for visiting!
I noticed that Visa (V) IPO came out earlier this month. I had been meaning to track this more closely, but let it slip by. When I heard that it was already trading around $60/share, I could feel my emotions change a bit. Anxiety kicked in — had I missed a great deal? Was it too late? What could I do to get ‘in’ on this deal?
We have a stock and mutual fund sitting in a taxable account with Firstrade. This was leftover money from our house down payments. I am waiting for the stock to recover some of its value, and for the mutual fund to go back up due to the market fluctuations recently. As I sat here at my computer pulling up information about Visa, I began pondering the use of this money. I could sell both, take the proceeds, and buy some Visa stock. It’s bound to go up, right? I mean, look at Mastercard!
Woah, tiger. Let’s slow down for just a second. That’s the thing about investing… your emotions get involved. Let’s take a look at Mastercard (MA).
It’s kind of hard to see on the above chart, but since Mastercard went public in 2006 the share price has gone through the roof. It looks like Mastercard came out at around $45 per share. The current price? $216.50 as of yesterday’s close. Wow. That’s $171.50 per share in growth, or 381% in about two years. Not half bad, even by Warren Buffett standards.
So Visa is going to do the same thing, right? Not necessarily. This is what your brain is telling you. It sees the positives of Mastercard as well as the similarities in the businesses. Skipping all other logical thinking, it encourages you to go ahead and invest… and soon! However, these are two completely separate firms. There is no guarantee Visa is going to earn you 381% returns within the next two years.
Don’t get me wrong, I think Visa is a great business. I wish I owned it. But trading in a broad mutual fund plus one stock to get only one stock is foolish. This isn’t play money we’re dealing with here. So for now, I sit on the sidelines. Sticking to our plan. Sticking to our 2008 goals. There will be other stocks in the future that I will invest in. That is a few years down the road, maybe even decades. The bottom line is to keep your emotions in check when investing.
That being said, if I had the abilities to invest in individual securities, I would invest in Visa. Have any of you out there bought some Visa stock?
