When was it, the last time that you have been to a social gathering and haven’t heard someone brag about an IPO? It has now become a social status to possess or the least talk about investments and IPO’s. IPO – Initial Public Offers have both winners and losers but by default the issuer is always a winner for meeting the purpose of listing. It’s all about the investors to choose one.
The Financial year 2017-18 has already seen 30 IPO’s listing of which there are a few gainers and rest are losers. This year, the IPO market has huge market participants with the insurance companies going public. The brands and their retail presence in the respective domains, are creating a lot of buzz and are also inviting first-time investors into the market.
Another reason, though crazy yet true from my own experiences, is people who have been participating in the online casinos have started looking at these investment options as some state governments stopped such games. So, be it for a social brag or big retail brands going public or gamblers finding it close to their earlier hobby, many new investors are coming into the market. This is for all those who are starting afresh.
Although there are many ways to choose a right IPO, it is important to understand a few fundamental things that one should and should not while deciding. Below are some of those.
Empty vessels make much noise
One should think of investing only after reading the prospectus/ Abridged prospectus and carefully note risk factors pertaining to the issue, financials of the issuer, object of the issue, outstanding litigations and defaults, if any.
- One should also look at IPO Grading, basis of issue price, business overview, background of the promoters and the instructions before applying.
- In case of any doubt/problem, one can contact the compliance officer named in the offer document.
- In case one does not receive share certificate or credit to demat account or refunds of application money, lodge a complaint with compliance officer of the issuer company and post issue lead manager as stated in the offer document.
All that glitters is not gold
One should not invest in IPO’s just by falling prey to market rumours, by any implicit/explicit promise made by anyone. Rather invest based on bull run of the market index/scrips of other companies in same industry/issuer company or by banking upon the price of the shares of the issuer company to go up in the short run.
Rome wasn’t built in a day
A rightly picked IPO can be a life-changing investment, if you simply make a good choice and stay invested for years. Many successful investors talk about long- term holding which goes with an old saying “Rome wasn’t built in a day” and yes, long term investment pays off.
On the other side , one should also remember the fact that not all that you hold long, will pay. Think of a bread slice put in a grill for long.
What is the best alternative
While we have the commandments of investments, one may not be enough skilled and have ample time to monitor their investments. In such case a professionally managed passive investment vehicle like mutual funds are always a good option for investing when advise by a professional.