by Jay T. 24 May, 2012 Investment Tips 0 Comments

IPOs are one of the best times to invest in companies. If you see potential of gain in first few days after IPO launch, its the best time to invest. In the era of dotcom boom, we have witnessed many companies have given high returns in initial days of IPO. Though many have given negative returns in long term, investors have made handsome money by investing in IPOs. People who have good knowledge of trading and those who can forecast short term gain, this is the thing for them. If you dont know much about investment and still a new sheep in financial market, dont worry, we will explain everything in simple terms.

Investments are like battles, they are not sure. Times are gone when investors could make abundance of cash in short time after IPO. Tech-Bubble is gone and now you need to be very sure brfore investing in any company. Make sure the potentiality of stock and company, potentiality depends on business model. If the business model is strong, return is guaranteed. We would recommend you to focus on long term gain rather than initial gains. Every IPO hs unique risks and returns. Try and read some IPO filing papers of some companies, you will get to know a few risks associated with various companies.

Hot Tips For Investing In IPOs

Detailed Research 

You can get thousand of articles about publicly traded companies but getting information about newbies is a little difficult. These companies are not largely covered by many analyst. You will get a detailed report published by company. Most of the companies try to cover all aspects in their memorandum but it is still written by the company and not the independent analyst. The best thing you can do here is to read the memorandum and try to search more stuff about the company online. If the company is famous like Facebook. you will get a lot to read about companys potentiality but if company is not so big, you wont get handy amount of content.

Research yourself The only option that remains is to carry out a basic research about the company that you want to invest in. Take help of certified financial planners and other financial advisers. If you really feel from the bottom of your heart that company will give you good returns, go ahead.

Focus on Underwriters

Great underwriters bring great companies public. So, try to select a company which has strong underwriters. The reason why we suggest you to focus on underwriter is because reputed investment bankers and brokerage houses will hardly support week companies. They always think of their reputation before bringing any random company to public. Smaller brokerage houses will help any company and focus less on quality.

Focus on Prospectus

Securities Exchange Bodies have made it very strict for companies to hide any details from the prospectus. Companies can not hide any potential risk from the prospectus. That is why we suggest you to read prospectus of some company to get better idea.

The prospectus includes all risks, opportunities, management details, long term goals and purpose of coming up with IPO. Prospectus gives you idea of how company is going to use the money raised by IPO and how it plans to grow in future. Though the prospectus is made by the company, it gets moderated by the security exchange authorities and companies can not show what is incorrect and misleading in the prospectus.

Watch Your Steps

Uncertainties are always there with IPO surroundings and market gets flooded rumours because of unavailability of detailed analysis. We always suggest our readers to watch their steps and think twice before going ahead with them.

You need to be cautious. If your broker suggests some IPO, be cautious and inquire about the company in detail. The reason we suggest this because normally, most of the money managers and institutions pass pass the offers from underwriters which they dont want. So, its possible that you are getting stock which nobody wants or not getting sold easily. Its better to scrutinise the company before you indulge any amount into it. Dont blindly trust your broker, they all are there to earn their livelihood, you are just a client for them not more than that.

Surf Web and Analyse Movements

Web has made it so easy to get any information about any random things. When you are considering to buy shares in some IPO, always got to some financial forums, go to the IPO columns and you will get some articles written by finance experts. Article may be unbiased or biased, what you need to look at is the comments. Many investors having years of experience share their views about the company by leaving comments under the articles. These comments are mostly unbiased and most of them are by veteran investors.

Price of any share also depends on the confidence that investors have on the company. These comments are the mirror reflection of the level of confidence on the company in investors community.

Follow above tips, and you will definitely feel difference between the way you used to invest and the way you will invest hence forward.

Feel free to ask your doubts and questions, our experts will answer them as soon as possible. If you have suggestions for readers, share them with proud. We respect your thoughts.