Investing in an IPO can be highly profitable or risky. It is when a company offers shares of stocks to the public. An IPO is away, the owner of the company gives up part of their ownership to shareholders or stockholders.
What is IPO ( Initial Public Offering)?
Initial Public Offering (IPO), is the first sale of shares or stocks by a privately-owned company to the public. The companies raise funds from the public for paying loans, for expansion of the company, paying debts, and many more.
On the one hand, companies raise fund from public and on other public get the shares or stocks of those companies. The returns on investment are depended on the work of companies.
The investors can apply for IPO stocks by filling an application form given by the stockbrokers for free of cost. The investors can also apply for IPO stocks online through the online platform provided by stockbrokers like Zerodha, Up stock, ICICI bank, share khan, and many more.
Benefits or Advantages of Investing in IPO
Let’s see, the advantages of investing in IPO.
The golden opportunity of investments
The best company public offering can be a golden opportunity to invest in them. Because Once it started trading on Exchange the price of stock or shares can be increased. This is one of the main advantages of investing in IPO.
But, It involves risk to invest directly in that company. If you know about that company closely and If you think the price of that company is reasonable or valuable then only invest time when IPO comes from that company.
In the case of Reliance, Maruti, Dmart, IRCTC, and many more, If we invested while the IPO, returns on investment have been very big. So, Do your own study while investing in IPO. If you think the company is good then invest in it, because It can be a golden opportunity to invest.
An IPO provides liquidity to the company’s founders, employees, and pre-IPO investors holding the company’s stock or share.
While the liquidity may not be immediately realized due to “lockup” requirements imposed by underwriters and other SEC rules, being a public company provides a means for the pre-IPO stockholders to monetize the worth of their stock at some point within the future.
Massive returns on investment
If you are successful in selecting the best company while providing the shares to public or IPO. Then you will get massive returns on investment.
Entering at early stages gives you the edge over other traders and investors who will enter after the stock is listed on the market. IPOs of certain companies performed very well in the market and gave stellar opening returns.
Get at the action early
By investing in an IPO, you can enter at the bottom of the company with high growth potential. It may also help you to grow your wealth in a short time with good returns.
Suppose, You invested in a young company that sells disruptive technology while IPO. If it manages the company and rake in profits, you would gain from its success too.
Archive long term goals
If you selected the best company stock or share while bottom price then you can archive the long-term goals. As mentioned earlier, IPOs of certain companies performed very well in the market and gave stellar opening returns, and After it covers more than 50% in 1 month.
How to invest in the IPO?
Below are the steps to follow to invest in an IPO.
- Firstly, select the right company’s IPOs to invest in them. Do your own study and analysis on it. Understand the company’s business plan, key strengths, performance to date, and purpose to decide wisely.
- After, studying and get the perfect knowledge about it then you should have a Demat and trading account to apply for it ( If you don’t have this account then open it ).
- Apply for it through your stockbroker. To apply through your trading account, you need to understand ASBA (Application Supported by Blocked Amount), which is an application that allows banks to block the money in your account at the time of placing bids for IPOs.
- The next step is to bid for it. Do bidding according to the list provided by the company.
- Once the bidding is completed, depending on the investor’s reaction to the IPO, you will be allotted the shares.
- Once you get a share you can enjoy the returns and gain on investment.
By following this steps you can invest in IPO.
Last word from mini invest
I hope you have understood “Advantages of investing in IPO”. If you have any question related to advantages of investing in IPO then leave in the comment.