Our pick for buying IPO stock: Interactive Brokers
- $0 stock trade fee
- $0 min. deposit to open
- Practice trading up to $10,000 in a simulated environment
It seems enticing to jump aboard an initial public offering known as an IPO — you get to be among the first to buy the stock when it starts trading on major exchanges. In some cases during the bull market, the stock jumped 50% or more within the first trading day, and sometimes even doubled in price within a few weeks.
Investing in an IPO at its offer price used to be almost impossible for everyday investors. Luckily, with platforms like Robinhood and Interactive Brokers things are starting to change.
Note: Trading platforms like Robinhood and Interactive Brokers don’t guarantee your order will be filled, but anyone can submit an IPO purchase request.
A lot of stock traders are looking to get in an IPO stock and sell it at a profit in a short period of time, typically within the same day of the IPO or in the next few weeks. Here’s what to consider before you sell your IPO stock:
Trading platforms that offer IPO stocks will typically either notify you of upcoming IPOs or they will have a calendar of upcoming IPOs. As an alternative, you can check for upcoming IPOs on MarketWatch and Nasdaq.
Some companies may bypass the IPO route and list directly on a stock exchange. These companies don’t typically appear in the IPO calendar or IPO sections of your broker. You would have to follow the news to learn when a company will list directly.
It depends on the company you’re looking to invest in and your risk tolerance. If the company is a solid one that’s been around for years before the IPO, it offers a popular product or service and it has great financials, you could consider buying it.
But if the company is new and in sectors like tech or healthcare where the product is still in development, chances are high that the company may fail even if they successfully raise funds.
And if it succeeds, you could be looking at a massive payday. It’s important to practice your due diligence before investing in an IPO.
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