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Big Tech, big outage: Is it time to diversify your portfolio along with your social media apps?

October 07, 2021
BY Emma Richards

October is shaping up to be yet another interesting month for Facebook, which is undoubtedly the world’s largest social network. Yet, the bigger they are, the harder they fall – and fall, Facebook did.  

Let’s look at how these recent events impacted Facebook’s stock price and the broader stock market, as well as the steps you can take to protect yourself from excess risk with a well-diversified trading portfolio.

Facebook fumbles 

The six-hour-long unscheduled downtime of Facebook, as well as other Facebook-owned apps such as Messenger, WhatsApp, and Instagram, saw the company trending for all the wrong reasons.  

However, Monday’s massive outage of Facebook’s services across the globe was only the prelude to more drama. Former Product Manager turned whistleblower, Frances Haugen, testified before Congress on Tuesday to urge US lawmakers to take action against Facebook’s ostensibly malicious policies and algorithms. Haugen accused the platform of intentionally fuelling misinformation and hate speech in order to drive user engagement. 

Stock market reaction

Unsurprisingly, it didn’t take long for the sell-off to begin, and Facebook’s stock dipped by more than 5% on Monday before recovering some of its losses early Tuesday.

Facebook’s tumble also caused a dip in Wall Street, leading the tech sector sell-off amid a backdrop of growing inflation concerns, surging oil prices, and the ever-looming threat of the pandemic. 

Admittedly, betting against a company valued at 1 trillion USD wouldn’t be considered the best play in the long term – especially with Facebook’s Q3 earnings call just around the corner (25 October 2021). 

The company’s Q2 earnings smashed analyst expectations with revenues of 29 billion USD compared to the 27 billion USD forecasts, and Q3 projections are pointing to yet another earnings beat. 

 

Reduce risk with a well-diversified portfolio

If we can take away anything from Facebook’s fiasco, it is how important it is to avoid single points of failure. Always ensure that you have a proper risk management strategy in place before entering the market and that individual assets can’t put your entire portfolio in the red. 

Diversification is a great approach towards consistent results as it can greatly reduce risk in your investments and that now extends to all aspects of our lives, even the one we live on social media. 

 

 

 

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