In this episode of Money Lessons, Andy walks through what happens when a company goes public — how a private business with a small group of owners becomes a publicly traded stock that anyone with a brokerage account can buy.

The episode covers the five reasons companies decide to go public, the underwriting process and the role of investment banks, the road show and how the offering price gets set, and what happens on the first day of trading — including why the price you and I pay is almost always different from the price the institutions paid the night before.

Using Airbnb's December 2020 IPO as a concrete example, Andy unpacks the "pop" between offering price and opening price, then revisits the three risks of stock ownership from two weeks ago to highlight how cognitive biases — particularly the urge to follow the crowd — make hot IPOs especially dangerous territory for everyday investors.

In this episode of Money Lessons, Andy walks through the three categories of risk that dominate the experience of owning stock: firm-specific risk, market risk, and behavioral risk. He explains why a stock's daily movement is mostly driven by company news, but why the broad market overwhelms those differences when it moves sharply—answering the listener's natural "which is it?" question. 

Using the 2008 financial crisis and the March 2020 pandemic crash as examples, Andy shows how fast and slow declines both punish panic-selling, just on different timelines. He closes with the observation that most of the gap between what individual investors earn and what the market returns isn't about picking the wrong stocks—it's about behavior.

In this episode of Saturday Morning Muse, Andy Temte explores the concept of risk tolerance in personal finance, discussing various factors that influence an individual's willingness and ability to take risks in investments. He emphasizes the importance of understanding one's financial goals, time horizon, age, income, existing portfolio size, knowledge, and stress tolerance. The conversation aims to enhance financial literacy and encourage listeners to make informed decisions about their investments.

As humans, we tend to not put enough thought into the worth or value we assign to the products and services we purchase. We’ll make better decisions on what we purchase with our hard earned $$ if we take a bit more time to consider how we place value on the things we buy. The interesting thing about finance and financial literacy is that it is equal parts objective evaluation of our financial position and our behavioral perspectives about our personal economy. How we feel about money, investing, and consumption is as important as the numerical and analytical side of working with our finances.

As we continue our journey to build financial literacy skills, you may be wondering where all the formulas and numbers are? Well, this is a big misconception of financial literacy—that it is more about numbers than it is about behaviors. How we feel about money & investing and how we behave with the resources we have via the decisions we make are as, or more, important than our ability to work with numbers. Hence, this is where we’re going to place most of our initial emphasis.

Our goal is to make better decisions about what we spend money on so that we can use our money more wisely. As an individual consumer, we want our assessment of value to exceed the price we pay. We want to minimize the likelihood of buyer’s remorse (feelings of regret) by thinking more carefully about the things we buy without tipping over into the spin cycle of analysis paralysis.

Financial success is dependent on making better decisions with our money. Making better money decisions depends on our ability to appropriately assign value to the things we buy. Turning off our mental autopilot tendencies and thinking more consciously about value is a prerequisite to improving our financial position.