There are multiple trading instruments available today for both beginners and veteran traders. Apart from stocks, shares, and mutual funds, people are also moving towards IPO investments. If you have been wanting to invest in an IPO but are not sure how to go about it, you could use this article as a guide to get the basic knowledge.
Firstly, let’s understand what an IPO is. We keep hearing about upcoming IPO, new IPOs, companies entering the IPO market, and other related news everyday on the internet and newspapers. An IPO is an Initial Public Offering where a company offers to sell its stocks to the public for the very first time through a stock exchange.
Read through the following points if you want to get started with IPO investment as a beginner.
1.What are the different types of IPOs?
There are mainly two types of IPOs. One is fixed price offering and the other is book building offering.
- Fixed Price Offering- In fixed price offering, the price of the shares is fixed before making them public. The company takes advice from financial experts and fixes a price for the units of shares which stays constant throughout the offering. Indian traders prefer this type of IPO due to its transparency and straightforward approach.
- Book Building Offering- In book build offering, the price is not fixed but the company offers a price range within which the investors can bid. This diverse approach attracts investors because of its flexibility and reflection of market demands. The shares offered usually have a cap price and a floor price between which the investors can bid.
2.How to apply for an IPO?
Applying for an online IPO has become significantly easier due to online tools. These days, you can download online applications and invest in IPOs within minutes if you meet the eligibility criteria.
Firstly, you will need to create a demat account. You can even go for a zero brokerage demat account which many institutions offer. After you have made an account, you can go to the IPO section to see all the listed IPOs, their prices, and available units. Apply for the ones that you want and select the number of units. Once your purchase has been approved, you will receive a confirmation.
3.How to be informed about IPOs?
There are many ways to be informed about IPOs and other financial instruments. One way is to read financial newspapers. You can also regularly check stock exchanges like NSE and BSE websites. Apps like TradingView help you stay updated with the latest charts and indices of the market. Whichever source you choose, make sure that it is reliable.
These are the few basic things that you need to know about IPOs. There are more things to know about IPOs, like when to sell your shares, when to hold them, which IPO to choose, or how to select the most trending app for investment. It is always important to do your research and be vigilant when investing in IPOs to get favourable profits and avoid losses.