Common do’s and don’ts to be followed by all investors are as under:
- An informed investor is the one who can make money. Remember to carry out your own due diligence about the promoters of the company, their plans, their past track record etc. Read the offer document carefully.
- Like all investments, IPOs are also not risk free. However you can manage the risk by carrying out due diligence and planning.
- Never follow the herd mentality. Be yourself. Remember how much effort you make while making purchase decisions for your other needs. Investment in IPOs is no different.
- During bull run, a number of fly by night companies tend to take investors for a ride. Beware. Remember we are in disclosure based regime and not merit based regime. This means that any company which meets the requirements can come out with a public issue provided adequate disclosures are made. So be careful about such operators.
- Plan for a long term investment. Good investment for a longer period of time will give decent returns.
- Not all issues coming with huge premiums are good and not all issues coming with low premiums are inexpensive. Pricing is an important factor and need to be considered carefully.
- Remember to limit your investment within Rs. 100000/- if you want to be called as retail investor. There are quotas available for retail investors and which are not available for high net worth investors. So do your calculations correctly.
- Also remember that not all shares you are bidding for would be allotted to you. Share allotment is based on proportionate allotment system depending upon the number of persons who have bid for that number of shares in which category you fall. In case of good issues, you may get far less number of shares than what you have bid for.
- If you believe that adequate disclosures were not made by the company, you can make a complaint to the lead manager to the issue or SEBI against the company for misleading investors.
