Top Mistakes to Avoid While Investing in IPOs
Top Mistakes to Avoid While Investing in IPOs
Initial Public Offerings (IPOs) often create a buzz—everyone wants to get in early and ride the next big growth story. While IPOs can offer great opportunities, they’re not guaranteed goldmines.
Thank you for reading this post, don't forget to subscribe!Many first-time and even seasoned investors make avoidable mistakes that cost them money or lead to disappointment post-listing.
Let’s explore the top mistakes investors make while investing in IPOs—and how you can sidestep them.
1. Investing Just for Listing Gains
Many retail investors apply to IPOs expecting a quick profit on listing day. While some IPOs deliver stellar listings, others list at a discount or flat.
❌ Mistake: Applying without understanding the business—purely for a short-term punt.
✅ What to Do:
Study the company fundamentals and decide if you’d hold it long-term if needed.
2. Ignoring the Company’s Financials and Valuation
IPOs often come with shiny ads, big media coverage, and celebrity endorsements. But none of that guarantees a good investment.
❌ Mistake: Skipping due diligence—ignoring revenue, profit trends, debt levels, and valuation.
✅ What to Do:
Read the DRHP (Draft Red Herring Prospectus) or analyst reviews. Check if the IPO is fairly valued compared to listed peers.
3. Getting Carried Away by Hype
When everyone around is talking about an IPO, it’s easy to jump in due to FOMO (fear of missing out).
❌ Mistake: Blindly applying just because it’s “popular” or “oversubscribed.”
✅ What to Do:
Stick to your investment process. Hype doesn’t equal quality. Many hyped IPOs underperform after listing.
4. Not Understanding the Business Model
Would you invest in a business you don’t understand just because it’s new or tech-driven?
❌ Mistake: Investing in companies with complex, unclear, or unproven business models.
✅ What to Do: Ask yourself: “Do I understand how this company makes money?” If not, stay cautious.
5. Investing Without a Time Horizon
IPOs should be treated like any equity investment—with a clear time horizon and goal.
❌ Mistake: No clarity on whether you’re investing for listing gains, 3-year growth, or long-term wealth.
✅ What to Do:
Decide your holding strategy beforehand. If your plan changes only because the stock is falling, you didn’t have a plan.
6. Applying with High Amounts in Every IPO
Some investors apply large sums across every IPO hoping one will hit big. This shotgun approach may backfire.
❌ Mistake: Overexposing your capital to untested companies.
✅ What to Do:
Be selective. IPOs should form only a small part of your portfolio.
7. Not Tracking Post-Listing Performance
Once you get allotment, the journey isn’t over. Many investors forget to track performance or exit at the wrong time.
❌ Mistake: Holding poor performers for too long or selling winners too early.
✅ What to Do:
Monitor the company’s performance and news updates. If fundamentals weaken, don’t hesitate to exit.
8. Not Understanding Anchor Investors & Lock-In Periods
Many investors follow what institutional or anchor investors are doing. But once their lock-in ends (usually 30 days), selling pressure can affect prices.
❌ Mistake: Buying post-listing just because marquee investors bought during the IPO.
✅ What to Do:
Be cautious of post-lock-in volatility. Do your own research beyond anchor interest.
Conclusion
IPOs can be great opportunities—but only when backed by research, risk management, and patience.
Avoiding these common mistakes can help you make smarter decisions and build long-term wealth, rather than chasing short-term hype.
🚀 Need IPO Advice?
At Goodwill Wealth Management, we provide clients with detailed IPO research, allotment strategy, and post-listing guidance to help them invest confidently.
Talk to our experts today before applying to your next IPO.