If a company Fixes a huge IPO price where its Face value would be Rupees 5 per share, but their IPO price would be charged at a premium of more than 1000 or 2000 per share.
Do not touch such companies. Reasons:
Most of these IPO’s would be made because of a huge pressure from the VC’s who would be stuck for more than 5 to 10 years with the company with no growth. For them , an exit is essential so that they can use this trapped capital on another idea. Because of their money that is trapped in this venture, they would have said “NO” to many founders with good ideas. These ideas would have now grown into a huge startup in front of their eyes and they will be cursing the venture that they have invested and offering little to no returns.
If you are investing in shares, its very good idea than mutual funds. BUT do not invest in IPO that charges more than 20 to 200 times its facevalue. You are only helping VC’s who are thinking of exiting such startups.
Also be sure that, the price of these shares after successful IPO will drop by 50 to 80 percent
At this time, the founder will make an intelligent investment of buying back shares at half to quarter price which will be a huge benefit for him/her,.
Invest on these companies when their share price comes to a realistic value
A decade ago: Companies went to IPO after raising little money from VC funds. Now-a-days Companies go to IPO because the VC’s want to exit with profits.
In fact, some of the most remarkable startups of our generation succeeded on the strength of their technology and business model, not venture capital. To wit, the total VC capital raised by Amazon ($108 million), Google ($36 million), and Salesforce ($64 million) prior to their IPOs and subsequent value creation would barely register as a single supergiant round in today’s blitzscale funding environment.
Thinking of investing in Shares? Or changed your mind to invest in Mutual funds?
Do not invest in mutual funds:
Mutual funds charge fees to manage your money.
Mutual funds do not guarantee returns.
Mutual fund ads talk about their disclaimer fastly which on the whole would mean “….. are subject to market risk”.
I always assume (I may be wrong), these fund managers can be manipulated by corporate brokers & as a result they can invest our funds based on the manipulation (I may be completely wrong here).
Instead of mutual funds investing your money on behalf of you on share market, you yourself invest your money on shares. I recommend Zerodha . By doing you so, you learn about success and failure on your own and this can be a learning. Do not gamble on day trading.
Instead of someone managing your money , learn yourself. It gives better ideas and also knowledge.
At the end of the day, its your hard earned money. Do not blindly believe a mutual fund just because it is managed by a respected brand. Its a BIG NO. Learn for yourself with your own money by investing in shares that is not crazily priced so that the Investors/VC can escape. Invest in shares that has a good value and brand name. Try to indetify golden shares in Mid cap. Following top boarders on moneycontrol.com will give an idea.
Learn with your money. Do not gamble with your money. Day trading is gambling and not for middle class people like us who have knowledge in shares. Just invest in good brand shares that is not over priced. Try learning by visiting share trading forums. Interact with experts in your circle.
All the best!