IPO Investment - How can an individual invest in an IPO?

Nutan Gupta

17 Feb 2017

Initial Public Offering (IPO) happens when a company decides to go public and list itself on the stock exchanges. Buying shares of a company is very easy when you buy it from the secondary market i.e. when the company is already listed on the exchanges. However, when a company comes out with a fresh issue, an individual needs to buy shares directly from the companies.

The Buying Process involved in an IPO (Initial Public Offering)

Stay aware and updated

Usually, when any company comes out with an IPO, it advertises heavily in the media. This is because the company wants to gain maximum publicity in order to ensure that the issue is a success. It is through this advertisement that one gets to know about the upcoming IPOs. It is very important that before applying for any IPO investment, an individual goes through the company’s financial statements, its track record and management’s future plans.

Get an Application Form

An individual needs to fill up the application form which is easily available with the brokers or any agent who sells mutual funds. The forms come free of cost. Fill up the form as per the directions mentioned in the form. Also, attach a cheque for the amount of shares you wish to buy. There is a minimum number of shares one needs to buy for specific issues, which is specified in the application form. Submit the form within the mentioned time frame.

Online Option

An individual can also apply for an IPO online through ASBA (Applications Supported by Blocked Amount). This is a process developed by SEBI while applying for an IPO. Through ASBA, the IPO applicants’s money doesn’t get debited until shares are allotted to them. An individual can login to his netbanking account and apply for IPOs directly.

While there are a lot of companies which come out with their IPO, it is not necessary that every company’s IPO perform well. There are some investors who have faced huge losses by investing in wrong IPOs. An individual should be very sure about the company and should have faith in the company’s management and its growth prospects before IPO investment.


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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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IPO Investment - How can an individual invest in an IPO?

Nutan Gupta

17 Feb 2017

Initial Public Offering (IPO) happens when a company decides to go public and list itself on the stock exchanges. Buying shares of a company is very easy when you buy it from the secondary market i.e. when the company is already listed on the exchanges. However, when a company comes out with a fresh issue, an individual needs to buy shares directly from the companies.

The Buying Process involved in an IPO (Initial Public Offering)

Stay aware and updated

Usually, when any company comes out with an IPO, it advertises heavily in the media. This is because the company wants to gain maximum publicity in order to ensure that the issue is a success. It is through this advertisement that one gets to know about the upcoming IPOs. It is very important that before applying for any IPO investment, an individual goes through the company’s financial statements, its track record and management’s future plans.

Get an Application Form

An individual needs to fill up the application form which is easily available with the brokers or any agent who sells mutual funds. The forms come free of cost. Fill up the form as per the directions mentioned in the form. Also, attach a cheque for the amount of shares you wish to buy. There is a minimum number of shares one needs to buy for specific issues, which is specified in the application form. Submit the form within the mentioned time frame.

Online Option

An individual can also apply for an IPO online through ASBA (Applications Supported by Blocked Amount). This is a process developed by SEBI while applying for an IPO. Through ASBA, the IPO applicants’s money doesn’t get debited until shares are allotted to them. An individual can login to his netbanking account and apply for IPOs directly.

While there are a lot of companies which come out with their IPO, it is not necessary that every company’s IPO perform well. There are some investors who have faced huge losses by investing in wrong IPOs. An individual should be very sure about the company and should have faith in the company’s management and its growth prospects before IPO investment.