7 things investors should keep in mind before betting on IPOs

economictimes.indiatimes.com:

IPO market is also buzzing with high-value IPOs, both in the mainboard and the SME space. India’s rising purchase power has resulted in consistent growth in investment from retail investors and institutional investors alike. Guided by SEBI, the increased awareness and investor-centric environment have enabled a transparent transaction eco-system that is helping investors in making informed decisions.

However, there are several nuances that investors have to keep in mind before investing, these are the most common mistakes that can potentially become a trap and hinder the financial success of the investors, led by a fear of missing out mentality approach. Mistakes that can hurt IPO investors: 1) FOMO and greed: Avoid the fear of losing out and the greed of multiplying money in a matter of hours or days. People purchase stocks on the advice of their friends or next-door neighbors.

On the other hand, before making an investment, investors must comprehend the fundamental business model, valuation, and growth prospects. Understanding the objective of the funds that a company is generating through an IPO is particularly crucial because, in general, funds utilized for business expansion yield higher returns than money used to pay off debt. Before investing in an IPO, being skeptical is usually helpful because it is preferable to proceed cautiously than regret.

Due to the complexity of the process and the need for meticulous preparation and execution, mistakes made during the IPO could have a detrimental impact on the firm. A realistic expectation and preparation are essential for an IPO. 2) Becoming A Sheep: Fear of missing out has a major impact on investors, one that can be a trap and prevent their financial success.