What are the guidelines for investing in IPOs?

Investing in IPOs (Initial Public Offering) can be a risky business. During the days of the dotcom, investors invested in IPOs to make quick money.

Now, the focal point has transferred from short-term gains to long-term forecast. Even with this altered focal point, it is complex to find a good IPO.

They have some exclusive risks linked that make them different from the normally traded stocks.

The following points mentioned below will give a clear picture if you decide to invest in IPOs:

Top 5 guidelines for investing in IPO

1. Intentional research is uncommon

All though we know that companies are hovering an IPO need to disclose all information in their catalog, the thing to ponder here is that it is written by them and not by a sovereign third party. So, it is not easy to get proper information. Search for information on Indian share market and learn as much as you can about the company to make an informed decision.

2. Select a company with strong brokers

It is sensible to select a company that has a strong underwriter. The common idea is that bigger brokerages bring eminence companies public. More prudence needs to be worked out for smaller underwriters.

3. Read the catalog watchfully

The catalog gives us vital information about the company and the contribution that might not be handy in share market news. Although we do not consider all that is printed, the information about company’s risks and opportunities, and the projected uses for the money that is heaved is important. If it is confirmed that the money will be used to repay loans, it is better not to go for such a company. If it is for research or development, then it can be a feasible option.

4. Be watchful

IPOs are bounded by a lot of indecision. Share market guidelines might help you choose. On the other hand, watchfulness is important. If a broker sturdily proposes a particular IPO, be careful.

5. Reflect on waiting for the confined period to end

A confined period (lock up) is a time anywhere between 3 to 24 months, when the company and underwriters forbid you from selling the shares. Waiting till the insiders are ready to sell the shares is an approach worth trying out.