Investing In Initial Public Offerings: 5 Suggestions

While some want to make an initial public offering, often known as an IPO, there are those who trade or invest in mutual funds. It is not as simple as it may appear to make money from initial public offerings (IPOs), but with careful preparation and the right kind of guidance, one can invest money in IPOs with the knowledge that they would deliver exceptional returns. A great number of well-known companies had spectacular gains on the first day of their upcoming IPO, but in the long term, they surely let down their shareholders and investors.

Tip 1: Check for the performance of the company

If you’re considering investing in an IPO, it’s a good idea to research the company’s track record of growth over multiple years before making a decision. One also has to have a look at any abrupt spike in

company’s revenues before the launch of the IPO. When a company’s revenue increases by 20% per year, that’s a good sign that business is booming. If the performance of the company is worse than that of the industry, then the company can be an underperformer. 

Tip 2: Pick a firm that has a strong brokerage

Investors need to be aware that top-tier brokers are consistently contributing to the marketing of high-quality companies to the general public. Extra caution is required when selecting companies that have smaller brokerages as their primary business. Using a small broker, on the other hand, has a number of advantages, one of which is that they have fewer customers, which makes it easier for an individual investor to purchase pre-IPO shares. Before putting money into a company, it is critical to conduct extensive research on the company, as was mentioned earlier.

Tip 3: Check for the background of the promoters

This occurs to be one of the most crucial points that have to be reviewed before investing in an IPO. Do check about the background of the promoters of the company and the experience they have. One also needs to check if the company has any defaults of payments from any banks as the performance of the promoters would for sure affect such a default in payments.

Tip 4: Carefully read the prospectus of the company’s IPO

Investors should never neglect to check the prospectors. Read over it well but never place all your reliance on the prospectus. Though it could be a rather boring read, this will provide you with an insight into the risks and the chances the firm has to offer. This would also provide details about how the money collected by the IPOs would be used.

Tip 5: Always wait for the lock-in period

The lock-in period might be anything from 3 months to 2 years and the stock brokers or the underwriters will not be able to sell their shares during this lock-in period. If the brokers or the underwriters are still holding on to their share of stocks even after the lock-in period, it implies that the company is growing strong and they undoubtedly intend to grow their assets.


The above-mentioned are the crucial 5 tips for investing in IPOs and 5paisa is the best platform to do this. Do bear in mind that when it comes to investing in initial public offerings (IPOs), investors who are aware profit more than those who are not informed.

Related post