Investing in the stock market is a challenging task for several beginners. Before diving into this ocean of stock market where the value goes up and down, you must study, examine all the stocks and understand the several strategies of a company.
As a beginner, learning all the strategies and techniques of investment is essential. If you’re looking to invest in IPO, this post will serve as an informative guide for you.
IPO is a solid way to invest money in a short period, but remember, not all IPO performs excellently. By doing adequate research and analysis of a particular company, you can make wise decisions.
If you’re looking to invest in an IPO, you must know all the in and out of a company. Learn in which segment does the company deals with. Study the current situation of the business along with its future biases.
In today’s post, we will learn about:
- What is IPO?
- 3 Things to consider before investing in IPO
- 5 guidelines to IPO for beginners
WHAT IS IPO?
IPO stands for Initial Public Offering is a process in which a private company goes public by issuing shares to the general public for the first time.
The company which offers its shares to the public is called an “issuer,” and it does with the guidance of several investment banks. Once the IPO is done, the company’s shares are traded in an open market.
The primary reason for a private company going to the public is to raise money. By selling its shares in open market, the company can collect and raise funds to grow its business successfully.
Here are 3 essential things that you should never forget before investing in any IPO.
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- Study the entire company
Study everything about a company which you’re looking to invest in. Read their prospectus, study the goals of issuing IPO and analyze how the company will spend its funds.
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- Stay to the current market trends
IPO’s are closely linked to market trends. IPO’s become more potent when the current market trend is rising. Thus, investing your money in IPO where the trend is higher is a successful way to accumulate wealth.
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- Keep a watch on the volume of the application
IPO is known to be a reliable investment option, and due to this, oversubscriptions are bound to happen. Thus, more applications entering means fewer shares on your part. So you must keep an eye on the quantity of applications IPO is receiving.
5 ESSENTIAL GUIDLINES TO IPO FOR BEGINNERS…!!!
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- Know The Intention Behind Investing
Before investing in IPO, it is essential to know the clear intention behind your investing. If you are keeping track of the company’s growth or clearly understand the sector in which a company is working, you can invest your funds in IPO.
The primary rule of investing in an IPO is not borrowing funds from anyone because it does not giveguarantee returns. In any case, if you lose it, all your crucial money will be wasted.
Also, you will have to bear the interest rate that you have to pay on the borrowed money. So you must make a wise decision and know the intention behind investing in IPO.
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- Big Names On The List Doesn’t Mean Big Returns
Several beginners fall into this trap by investing in big names, and let me tell you, big names presented in the list of crucial stockholders and investment banks should not arouse you to buy the IPO they are backing.
It’s generally because they have considerable funds to invest in, and their calculation scales are way different for their backing.
However, to know the value of money, you must follow the company’s facts and figures given in the prospectus and focus on its growth possibilities before investing in IPO.
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- Open a Demat Account
To invest in an IPO, you must have a Demat account. Demat account means a simple process of converting all your physical shares into an electric form.
Earlier, there were physical shares that were hard to handle, but the entry of the Demat account made it easier to take all the shares. Without having a Demat account, you cannot trade or buy shares available in the share market.
You must open a Demat account in any Depository Participants who are registered. However, you can also open a Demat account without having any shares in your account.
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- The Performance of IPO and Market Trend Are Closely Linked
The market trend lies on several major factors and involves stocks from various ranges of characteristics. These factors only follow the movement of the stock market, but they don’t lead it.
An IPO which is robust and financially strong in all terms will perform well in rising trends of the stock market. And it is a quick way to earn money without any trouble.
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- Wait Till Lock-In Period Is Over
The lock-in period is the time period in which the investors are restricted from receiving or sell their investments. During this period, no investor can take the step to sell their investments. However, once the period is over, they are free to sell their investments.
If you can wait till the locking period is over, you can analyze the profitability of stocks, and by doing this, you will be safe from any type of risk.
FAQS
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- What does IPO mean?
IPO stands for Initial Public Offering, and the simplest way to define IPO is a process in which a private company goes public by issuing shares to the general public for the first time.
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- What three things to consider before investing in IPO?
Here are three things to consider before investing in IPO:
1) Study the entire company
2) Stay to the current market trends
3) Keep a watch on the volume of the application
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- Are all IPOs profitable?
We all know investing in IPO delivers big profits. Several investors are lucky because the money they’ve invested in the IPO gave them huge gains and dividends through the rising value of the shares, but it doesn’t mean everyone is lucky to get enough returns
Final Thoughts
Once companies make their decision to go public and start down the road towards an IPO, the future seems to be unclear until the offering is entirely completed.
IPOs are risky, and not every company will give you the returns of your money you’ve invested in the IPO. So you have to be precisely clear before investing your hard-earned money in IPO.
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JAI SHRI RAM 🙂
Keep on writing, great job!
Highly energetic blog, I liked that bit. Will there be a part 2?
Greetings! Very useful advice within this article! It’s the little changes
that produce the most significant changes.
Many thanks for sharing!