Investing in the stock market is a great way to build wealth over time. But losses are normal in short-term investments and fluctuations in investment values are also natural. Investing requires patience instead of panicking if the value of your investment declines. There is a common belief among investors that investing in IPOs of companies will not result in loss of money. Almost everyone thinks that an IPO will open at a premium to the issue price and exit at a higher price on listing day. But the actual math is the opposite. Many companies make their debut in the stock market at a discount to the issue price.
Keep an eye on debt
Find out all the information about the IPO of the company you are considering investing in. Among these is the most important information about the loan. Many companies launch IPOs only for the purpose of paying off debt, as the more investors buy shares, the higher the company’s stock price will rise. So first check what the company is doing to repay the loan. How much cash do they have to pay off the loan? Invest only after getting all information.
Research is essential
Be it IPO or elsewhere you need to do good research and get informed. Don’t invest in IPOs on someone’s advice or following someone else’s. Find out what the company does, how much profit it is making. Along with this, it is also necessary to see the future growth prospects of the company.
Your goals should be clear
You should know whether you are investing in IPO for long term investment or to earn profit. Can you get a better return on the same investment elsewhere? Find answers to many such questions yourself and then decide to invest.