Every time a big IPO comes in the market, the atmosphere becomes hot. A shower of tips on WhatsApp, GMP’s noise in Instagram reels and people in the neighborhood say that it will double the money! But the question is, do the stock market giants do this? The answer is, not at all. Warren Buffet, who is called the legend of the investment, says, the stock market is a game in which there is no need to hit every ball. According to him, before investing in IPO, one should take careful steps.
1. Understand business, don’t just be impressed by name
The first mistake while investing in an IPO is to run after the heip. Warren Buffet’s advice is: Do not invest in the business you do not understand. Many times people apply to the company just because it is in trend. But IPO is not a lottery ticket. It is as if you are buying a share in your street shop, will you invest money without profit?
2. Avoid inside moves
The IPO is like a game of cards in which every leaf in front knows – not you. Promoters and initial investors of the company have all the information inside, while the common investor has just a bright brochure. Buffet’s advice is “If you do not understand in a game who is the weakest player, then you may be.” Therefore, do read DRHP (Draft Red Herring Prospects) and understand how many shares are being sold.
3. See the track record first, then invest
Buffett prefers to invest in companies whose profits and performance have met the test of time. Even though new companies come up with expectations, their track is not recorded. You will remember the example of Paytm, the more the noise was at the time of the IPO, the faster the decline later. Before investing, see whether the company is making profit or only promises.
4. Choose what you know
If the IPO of a new technology startup is coming and you do not understand its technique, then stop. Buffet believes that the risk is hidden in what you do not understand. You should invest in sector companies whose business models and demands you understand. Such as FMCG, banking, retail etc. This rule applies to every decision of life, not just investment.
5. Note the brand value and monopoly
Buffett prefers companies that have strong monopolys or mo at – that is the specialty that separates them from the competitors. Every new company claims that it is unique, but does it really have anything that is not easy to copy? If not, that company cannot be called a long race horse.
6. Do not get under the greed for the profit of Listing Day
IPOs are often prepared in such a way that promoters benefit, not investors. Warren Buffet says, the price is what you repay, the value is what you get. Bankers set prices in such a way that more money can be withdrawn. In such a situation, if the company is overwall, then there will be not much profit left for you. It is better that you wait for the correct company at the right price.
7. Monitoring after listing
Buffet is the real mantra, patience. They do not invest money in every IPO, but after the listing, they track the company for some time. You should also make a post-IPO walchalist. See the company’s profits and management to some quarters. If all goes well, then invest only.
Be a long race horse, stay away from shortcuts
India’s IPO market is like a T20 match, fast, exciting and uncertain. But Warren Buffet’s strategy is like a Test match, patience, thinking and power to live up to the test of time. If you also want to stay in this investment game for a long time, then adopt their suggested principles. Understand business, give time, and do not consider every shining thing as gold.