Investing should be implemented early. It is said by most of the popular financial experts all over the world. They said, that you should start investing at an early age of your life with a minimum amount so that you can enjoy the benefit of compounding with time. Since the investment increases at a compounding rate, the wealth increases over time. Most financial experts invest in stock markets for a longer period. When a company needs capital for expansion, it introduces the company shares in the stock market to generate revenue through IPO. When the upcoming ipo of the company is introduced, the share price of the company remains low. Hence purchasing the share during an IPO is the best option for a strategic investor.
In the eyes of an investor, IPO is a golden investment opportunity. If you are curious, this essay will clear your doubts.
- Long-term plan: It is the primary reason behind investing in an IPO. We know that a company has the potential to grow by 100 or 1000 times. So if you have invested in a company’s IPO, you have the probability to gain a hundred times the initial investment over a longer period. In the early 2000s, a company named XYZ introduced its IPO. The initial price of the shares was around 50 rupees, and your father purchased 1000 shares of the company during the initial public offering. After 22 years, in 2022 the share price has increased to 5000. So your father has earned a total of 50 lakh over an investment of 50 thousand over 22 years. This is the method of wealth generation with the help of IPO.
- Potential for higher return in a short period: Apart from the long term, the short-term goals of investors, can be achieved. There are many companies in a country running successfully, and they do not have debt over them. Let’s assume that the company wants to expand further. Instead of taking loans from the bank, the company intends to generate capital through IPO. For these companies, the IPOs are highly successful as the price of the company increases by 20-30% within a few months. If you are a short-term investor, you should look for these opportunities.
- Opportunity to buy cheaply: Most of the standard companies generate profit in long term. Let’s try to understand the fact with the help of an FMCG company. An FMCG company holds a market share of 30%. With the increase in population, the sales of the company will increase. Now you know that the company will generate higher revenue in the future so you invested in its upcoming IPO. During the initial public offering, the share price of the company was low but after a few years, it increased due to an increase in revenue for the company.
- Wealth multiplication: Apart from an increase in value share, other factors can also increase wealth. The company introduced its IPO in the year of 2010. After three years, the company introduced are shared split of 2:1. Thus for every two shares, the company will provide you with an additional share. Again the company may also gift shares to its shareholders at a certain rate. Apart from this, the investors are entitled to receive dividends from the share. These factors contribute to wealth generation and multiplication.
These factors are the primary reason behind investors investing in IPO. For applying for an IPO, you should have a registered broker like 5paisa. They can help you to apply for the IPO, at an early date.