Despite predictions that its stock would soar on its first day of trading, Facebook was a big fizzle.  In fact, Facebook’s underwriters struggled to keep the price from plunging through the initial offering price of $38 to avoid a huge embarrassment (note how the price flat lined at $38 starting at ~3:30pm on Friday, 5/18/12).

Despite widespread belief to contrary, buying a stock because you know the company or “feel good about the company” is no way to invest.  This kind of thinking can be very dangerous to one’s financial health. Moreover, this approach is usually coupled with a strong emotional attachment that causes investors to hold onto that company much too long once the share price begins to deteriorate.

Warren Buffet once said, “You may have all these feelings about a stock, but a stock doesn’t know you own it. It doesn’t care what you paid for a stock.”  It’s wise to use your head, not your heart, to keep emotions from corroding your investment discipline.