Firstly, what’s an IPO?
IPO stands for Initial Public Offering. It refers to the event when a private company goes public for the first time. It’s like a new stock coming to the market.
How to Trade an IPO?
It’s easy. Just a few things you’ll need.
- Get a brokerage account, if you don’t already have one. A brokerage account enables you to trade any stock available in the securities market. It’s worth reviewing what a brokerage account offers before signing up. There is no harm in having multiple brokerage accounts but having too many can become cumbersome and difficult to manage. I have a total of four (actively use 2). Here are a couple of recommendations if you are looking to sign up for one:
- Go to the IPO section in your account to find out active IPOs being offered by your brokerage. Remember, this list keeps changing as IPOs come and go.
- Before you decide to invest, it’s prudent to do your research and learn as much about the company as you can. A document called ‘The Prospectus’ should be made available to you by the brokerage. Make sure to give this a good read as it contains all the info the company file with the regulators (SEC in the US).
- Once you’ve decided to invest, follow the steps in your account. Everything from here is automatic. If you get the allocation, the shares will show up in your account. Please note that there is a real possibility that you may not get the shares. This happens if there is a huge demand for the IPO and everyone wants an ‘in’. Don’t worry, you won’t lose your money in this case. It stays unused in your account.
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