Money Talks News may earn commission or revenue through links in the content below. Our editorial team independently selects all products. Compensation does not influence our recommendations.
President Donald Trump’s latest financial disclosure shows he bought between $15,001 and $50,000 of SpaceX stock on July 10, then sold between $1,001 and $15,000 of it a week later. (1)
It was one of more than 1,000 trades in his account that month.
Cue the hot takes. Some people will see a president buying a hot stock and want to follow him in. Others will see a scandal. I’m not here for either.
I’ve invested my own money for 45 years, I was a stockbroker during the 1987 crash, and I’ve made millions in the market over the years. What I see in this filing is a money lesson most people will miss — and it has nothing to do with rockets.
Here’s the backdrop. SpaceX priced the largest IPO in history on June 12. (1)
Shares hit a record $225.64 on June 16, and by Sept. 23 they were trading around $153 — roughly a third below that peak. (2) At their summer low, they sank to just under $105, well below the $135 IPO price. (2)(3)
That’s not unusual. University of Florida professor Jay Ritter, who has tracked IPOs for decades, found the average newly public company trailed the overall market by about 20 percentage points over its first three years. (4)
So what should you actually take away from the president’s SpaceX trade? Five things.
1. The headline isn’t really the trade
The White House says Trump doesn’t pick these stocks. According to a spokesman quoted by Reuters, third-party institutions manage his portfolio independently and replicate recognized indexes, such as the Schwab 1000. (1)
The Schwab 1000 tracks the 1,000 largest publicly traded U.S. companies. (5) Once SpaceX went public at a trillion-dollar-plus valuation, an account mirroring big-company indexes was going to end up owning some. That’s not a hot tip. That’s plumbing.
Whether you buy that explanation or not, the lesson stands: the most boring part of this story is the part worth copying.
2. Hot IPOs usually cool off
Ritter’s data covers more than 9,000 IPOs going back to 1980. The average one returned about 19% over its first three years — while the broad market returned nearly 40% over the same stretches. (4)
It gets worse. More than a third of IPOs lost over half their value in their first three years, measured from the first day’s closing price. (4)
The reason is simple. By the time a company is famous enough to lead the evening news, the excitement is already baked into the price. And the people selling to you are often insiders who’ve waited years to cash out.
3. More shares keep coming
After an IPO, insiders and early investors are usually barred from selling for a set period. When those “lockups” expire, a wave of new shares can hit the market. The Motley Fool cited lockup expirations as one reason SpaceX slid from its summer high. (3)
Most regular investors never think about that risk when they’re chasing a big name. But I’ve been trading stocks since 1981, and I can tell you: when the excitement fades, the most-hyped stocks tend to fall the hardest.
If one hot stock dropping by a third would keep you up at night, that’s a sign too much of your money is riding on the same kind of paper asset.
Many investors diversify part of their savings with physical gold and silver — tangible assets that have held value for millennia. A Gold or Silver IRA from Anthem Gold Group makes them part of your retirement, tax-advantaged. Request the free guide — no cost, no obligation.
Quick aside — most internet financial advice comes from people who weren’t alive during the last recession. I’ve been writing about money for more than 35 years. Want rock-solid advice? Sign up for the free Money Talks Newsletter. Takes 10 seconds. No fluff. No spam.
4. Size matters more than the pick
Even at the top of the reported range, $50,000 is a rounding error for a man whose fortune runs into the billions. If SpaceX went to zero tomorrow, Trump’s life wouldn’t change a bit.
That’s the rule for any speculative bet: keep it small enough that losing every dime wouldn’t change your life, either. For most people, that means a small slice of the portfolio, not a big one.
5. Own the haystack, not the needle
Instead of hunting for the next SpaceX, you can own the whole market through a low-cost index fund. When the next blockbuster IPO grows big enough, it shows up in your fund automatically — in proportion, without you having to guess.
I’ve owned some big individual winners over the years, and I’ve held them through plenty of scary headlines. But the money I can’t afford to lose doesn’t ride on any single company.
If your portfolio has grown to the point where one mistake gets expensive, a second opinion is worth having.
When it’s time for a second set of expert eyes, SmartAsset matches you, free, with up to three fiduciary advisors — legally required to prioritize your interests. In addition to investment advice, they spot tax savings, Social Security strategies, and planning gaps you’d never see alone. $100K+ in investments? Get matched free in minutes.
The bottom line
The president’s SpaceX trade isn’t a stock tip. If anything, it’s a reminder that the biggest fortunes are often invested in the most boring ways.
Hot IPOs make great headlines. They make lousy retirement plans. The investors I’ve watched build real wealth over the past 45 years didn’t get there by chasing whatever was on TV that week. They bought broadly, sized their bets sensibly, and gave time room to work.
Let the headlines chase the rocket. You stick with the launchpad.
Sources: 1. Reuters via U.S. News & World Report; 2. TheStreet; 3. The Motley Fool; 4. University of Florida (Jay Ritter); 5. Schwab Asset Management
Add a Comment