Can you profit from IPOs?
It is not that big a red flag. But mostly, what happens is people think that investing in an IPO is a quick way to make money.
Getting allotted for a good company’s IPO is challenging
And yes you do, but it generally doesn’t work out that way. What happens is that if a company is good, then more people will be wanting that IPO.
Why investing in IPOs can be a hit or a miss
Then your betting average will go wrong because there is an element of lottery in every IPO. A good company’s IPO everybody wants. So, the number of times it is oversubscribed is far higher.
Paytm IPO
If you recall the IPO of Paytm, it was a huge issue. Many people wanted it, many people invested in that, but it was so big that everybody got allotted.
Why IPOs are a poor investment choice
Everybody got allotted, and the price actually tanked on listing. So, if the company is good, it’ll be in huge demand and your likelihood of getting allotment will be lower
Scarce returns in most cases
If the company is bad, not too many people will turn up and you are likely to get allotted there but it’ll not multiply.
Other Videos
In our previous Investors’ Hangout, Dhirendra Kumar talks about the 3 dos and don’ts for every young investor. Click on the below link to check out the full video: