IPO investing can be risky. But there may be a solution

[{"selector":"#anim-28bea479db4dd0874c7a2fafafc98ca5","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-52b926a7224ef0ec6146afcd756c6db6","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}]

Not all IPOs perform well when they enter markets

[{"selector":"#anim-7558a27abc799090766c61ccd5c32875","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-c8a1987244058bb0662894ca29b30670","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Why? A lot of these companies enter the stock exchange with high valuations

Data speaks

[{"selector":"#anim-9869b3c5460568d782cdb7f611f9e7d9","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-f24eed9180be7f3c4324723c09a9d6be","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Of the 157 IPOs launched since March 2020, 32 are still trading below their issue price!

Is there a solution to such unpredictability?

[{"selector":"#anim-ea2647623eff79ae794525605d13e975","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-2e94aeb588206bc317a4facae417a596","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] You can subscribe to IPOs through mutual funds. Benefits: - Potential allotment in oversubscribed IPOs - Mutual funds are managed by professionals

More benefits of IPO-centric mutual funds

[{"selector":"#anim-5a1e9ad22ee19c3099faa0e0635b7109","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d9a647a8bdd5f48d4773ee05c99b62a5","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] - Funds have a tax advantage. The gains are not taxable until you sell the fund - But if you sell your direct IPO investment within a year, you are liable to pay 15% tax

Is there an IPO-focused mutual fund?

[{"selector":"#anim-591f65440462e5c23c6ad5464c3682d0","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-1b6a35b5c03c31e665a5585017132c2f","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Edelweiss Recently Listed IPO Fund is one of the oldest. It was launched in 2018. It invests at least 80% of its money in IPOs.

Performance

[{"selector":"#anim-c54f259d01f25df20aade0179b749f33","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d8405fd1c4c5358d62adb572cca5d467","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Based on SIP returns, it has outclassed its rivals and the broader equity market over 3 and 5-year periods.

Hits and misses

[{"selector":"#anim-6bc35973b65f3494424eaec51e9cf4f7","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-89cb7852201365e98fd90c025eff4e6c","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] The fund’s selection of IPOs has been a mixed bag. It has picked its fair share of winners and losers, as seen in the table.

Our take

[{"selector":"#anim-4e9b596e5581fd492791502dc38c5124","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-fbc07ab0b8d83a3283dd812a86fcde51","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] The fund is yet to be tested by a bearish market. That said, consider this fund if you are an aggressive investor with a fondness for IPOs.

Dive in Details

[{"selector":"#anim-b199f2e9dac78892b06dfcee9d6fdd1d","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-39c21793b8e8fca524149d57bae8c993","keyframes":{"transform":["translate3d(-104.48548%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}]