When it comes to investment, think long-term. Short-term plans give short-term returns. They may not last, and you will soon be looking for ways to make quick and easy cash. Hence, by making decisions with your long-term goals in mind, you can create a portfolio that delivers growth and wealth creation and caters to your lifestyle needs when you retire.
Planning investments for the long term in upcoming IPOs is a good strategy. You get to participate as an investor before the company’s share price starts soaring and reap good returns. According to a recent article by Mint, around 75% of the recently listed companies showed a positive return over one year. This bolsters the point of having ways to incorporate upcoming IPOs into your investment plans.
How can you plan to add upcoming IPO companies to your investment strategy?
- Set funds aside: You can have a specific amount that you can afford to allocate toward an upcoming IPO. A single lot of shares in an upcoming IPO is ₹15,000. Individuals can invest up to 2 lakh rupees in multiple lots. On the basis of what you can afford, set such an amount aside, ready to be invested.
- Stay updated with news: Knowing when a company is looking to file for listing with SEBI can help you. By staying updated, you give yourself the chance to make your investment decision in time for the IPO.
- Research thoroughly: Researching and understanding the company and its business aids you in making sound investment decisions. Speak to advisors and experts if needed. Understand their business plan, moat, financial statements, shareholding pattern, industry sentiment, industry trends, competitors and much more before deciding whether the upcoming IPO is feasible enough for you to put money in. Researching does not eliminate risk. However, it does help you mitigate risks.
- Check promoter holding and underwriting: Promoters are the ones who make a strong case for the company in an upcoming IPO. However, if they appear to be reducing their stake significantly, investing in that company may not always be a good choice.
The same goes for the underwriters. In layman’s terms, an underwriter acts as an intermediary between the company, the regulators and the investors. They prepare the company to raise funds and successful listing. People say a quality underwriter backs quality companies. Needless to say, you can never be too cautious.
- Beware of news and influencers: Getting consumed by the news and the whole buzz can go sideways for you. Making mindful decisions is always going to help you. Essentially, knowing when to put your funds in and deciding the investment period is what will assist you in investing for the long term through the upcoming IPO strategy. It adds to diversification in your portfolio.
Incorporating IPOs into your long-term investment strategy can be rewarding. By setting aside funds, staying informed, conducting thorough research, and being cautious of news and market influencers, you can wisely choose IPOs that enhance your portfolio’s diversity and growth potential. This approach aligns with long-term financial goals, offering a pathway to wealth creation and stability as you plan for the future.
