Buying One Share of Facebook Stock Is a Total Rip Off

Illustration for article titled Buying One Share of Facebook Stock Is a Total Rip Off

When Facebook stocks begin trading on the market—most likely this Friday—Wall Street hotshots and ordinary folks will be clamoring to get in on the action. Don't worry if you don't have a broker and a fancy investment portfolio because there are plenty of companies more than happy to help you get a single share—for a price. CNNMoney reports:

Buying through a one-share site is generally more expensive for customers than buying through a broker. Both GiveAShare.com and OneShare.com charge a $39 fee for their services, which include buying the share and procuring the paper stock certificate.

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So for $39 plus the price of a share, you get a piece of paper that says you own a teeny tiny piece of Facebook. If you've got an account with a broker on the other hand, trades typically cost less than $10. Buying a single share of Facebook won't make you any kind of wealthy, so hey, might as well throw away your money as efficiently as possible. [CNNMoney via AllFacebbok]

Image courtesy of the SEC

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Methylsulfonylmethane

"you get a piece of paper that says you own a teeny tiny piece of Facebook"

This statement is false.

It is a very common misconception that by owning a company's stock you actually own a small piece of the company itself. This is completely untrue. What you own is a piece of paper (or digital file) with that company's name on it. That's it. Stocks do not have any actual equity in the company they represent.

If stock-holders really where partial owners of a company then when that company went bankrupt stock-holders would be given the same privileges as any other creditor. Stock-holders are NOT creditors. When a company that you hold stock in goes belly-up you get no benefits whatsoever. Nothing, nada, zilch. You own a completely worthless piece of paper.

A much better way to describe a stock is to compare it to currency. Stock in Facebook could be considered the currency of the fictional country 'United States of Facebook' or whatever. The value of a stock goes up or down based on investor's confidence in the ability for that stock's 'home country' to make money now and in the future. This is exactly how the value of real currencies such as the Dollar or Yen change in relative value. If a real country disappears or otherwise collapses then that country's currency becomes worthless which is exactly what happens to a stock when it's company goes away.

Ignorance about how the market works is one of the biggest problems in modern consumerism. Proliferating such misconceptions is just making that problem worse. Stop it.