Investing to earn a great profit on your hard-earned money has become quite common these days. Some invest in mutual funds, bonds and some opt for IPO. Short for Initial Public Offering, IPO is the first set of shares that a company offers to the public to raise funds. Companies decide to go public by registering with SEBI to earn a place in the upcoming IPO list.
Investment in IPO is favoured by many as it has a potential of growing manifold over a short period, which means higher returns. But, there’s always some risk involved in such financial markets. So, you need to tread carefully while investing in IPOs. Here are some points to keep in mind for opting for the IPO with great returns.
Do your homework and do thorough research on companies in which you wish to invest. While listing for IPO, a company must submit a prospectus stating their financials, record in the market, and their objective behind going public. But, don’t base your decision entirely on this as there is no surety that the document is all truth and no lies. Gather as much information as you can concerning the company in question. Look for past press releases, learn about its competitors, and educate yourself with every little detail about the firm.
Study The QIB:
There is some scope that the articles available online regarding the company of your choice are unbiased. However, there’s no definite way of knowing that. In such case, you can do one simple thing- analyze the QIB. If the QIB category is oversubscribed, then the probability that the shares will be profitable is quite high.
Invest At Cut Off Price:
Applying at the cut off price means that the investor is ready to pay the amount that the company has decided for the shares at the end of the book-building process. Bidding at the cut off price will increase your chance of getting the shares. Your application will be accepted for sure, no matter what the final allotment price is.
Pick A Good Broker:
Choosing a reputed broker is of utmost importance as they always bring public reputed companies. A strong broker will have many strong connections in the market and can pull some strings to ensure a decent allocation of shares for you.
Wait For The Lock-In Period:
Lock-in period is the time, ranging from 3 months to 2 years, up to which stockbrokers or underwriters cannot sell their shares. So, if they hold on to their shares even after the lock-in period is over, then that means that the company is going strong, and they wish to grow their investments.
Investing in an IPO is an easy task. The process is very simple, and all you need is a valid PAN card and an online Demat account. But, it is of utmost importance that you finalize the best company to invest in from the current or upcoming IPO list. Analyze the traits of the firm and invest your money wisely.
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