Here is a list of mistakes that an investor can avoid when investing in IPOs
1. One shouldn’t think of investment in each and every IPO. An investor should plan to invest only in selected IPO which you think that the company has better prospects and valuation is not on the higher side.
2. Don’t invest just on the basis of information spreading on the internet. Sometimes these are managed by the companies and their consultants.
3. If during the first 1-2 days an IPO is oversubscribed then people generally believe that they should also apply. They assume that there is too much demand for the stock and it will open at a huge premium. This might definitely be good work by the company’s banker to the IPO but expecting a huge listing gain/premium might not be true.
4. Invest only those funds which are available for the next 1-2 years at least. Taking loans/funding for investment in IPO should be avoided.
5. There are few online websites that provide information for upcoming IPOs. They also spread some news/rumors on the prevailing premium before the listing. Investors should avoid taking investment decisions on the basis of such misleading and baseless news.
6. If the previous few IPO have given bumper returns, then it doesn’t mean that the upcoming IPO will also give similar returns. Sometimes people hear news from their friends and colleagues that they invested in an IPO and made good returns. They start feeling like missing out on such opportunities and applying for the next upcoming IPO without going through the details and applying their brain.
7. Brand name: A familiar or popular brand name doesn’t mean that you will have a sure shot of listing gain/premium. You should check the valuation at which shares are being offered. $S&P 500(.SPX)$ $NASDAQ(.IXIC)$ $DJIA(.DJI)$
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