Everyone always loves to get in on a good initial public offering (IPO). But not everyone fully understands all factors related to IPOs. Some people seem to think IPO stands for Invincible Prosperity and Opulence. Nothing could be further from the truth.
IPOs, like any other stock investment, must be evaluated extremely carefully. The individual investor must remain very cognizant of how this particular IPO investment fits in with his or her total portfolio. As with so many other areas of life, if it sounds too good to be true, then it is too good to be true. There is no such thing as a free lunch. Get-rich-quick schemes are go-broke-fast guarantees.
Lee Spears reports on some recent IPO trends (The Facebook Effect: Fewer IPOs Bloomberg Businessweek 10/8/1210/14/12, p. 52):
The amount of money raised in initial public offerings last quarter dropped to $21.3 billion, the second-lowest level since the financial crisis. Among the factors: concerns about a slowing economy and investor wariness after Facebook lost about half its value following its IPO in May.
Some investors understand all this and tragically some do not. The stock market is not a casino nor is it a guaranteed jackpot. The stock market is a major, serious vehicle the informed and careful investor will use wisely over time to build up a measure of financial security. Even then, the old adage rings truenever put all your eggs in one basket. Portfolio diversification is the key to steady, long-term success with manageable risk.
Spears is right. The Facebook IPO outcome definitely put a damper on things. Nevertheless, the wise investor will be able to take it all in stride and continue building for the long haul.
style=”border:none; width:450px; height:80px”>