IPOs are the most intriguing part of stock markets. They can make fortune for investors. There are some profitable tips to follow before buying IPO stocks.
Every IPO is not a superstar that can skyrocket on listing day. It can show enough volatility around IPO issue price. Some stocks can rise on listing day while other can fall significantly.
You should always be ready to accept its move on either direction. You should also need to act smartly by controlling your emotions to prevent investing in wrong company.
Retail investors can perhaps easily & quickly differentiate IPO of a hot company from lackluster company. You just need to carefully scrutinize the growth prospects of a company & planning for long term.
Once you are successful in identifying a potential IPO stock, you can generate huge returns within short period of time. Here are 14 profitable tips to keep in mind before buying shares in upcoming IPOs:
(1) First-Day Investing Is Like Rolling The Dice
It is one of the most authentic & profitable tips to follow before buying IPO stocks. IPO listing day is always the most volatile day in stock’s life.
It is perhaps due to demand & supply imbalance, investor’s excitement or fear, eagerness to book profit or loss as quickly as possible & many more.
In a bullish market scenario, investors are likely to pay more premiums against stock issue price as compared to those who bought it at offer price.
According to a study conducted by Jay Ritter, a finance professor at University of Florida, first-day market price of newly issued stocks during past decade has been an average 11 percent higher than offered price.
Therefore, investors are advised to avoid buying IPO stocks on listing day. You should at least wait for few days until the stock volatility stabilizes.
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