How I Doubled my Money in the Stock Market
Everyone wants to grow their money but also do not want to take the risk. There are multiple asset classes where you can invest and grow your money without taking much risk, but when it comes to returns, the share market is the only place where you can get a real bang for your buck. Most newcomers in the market look for a tip to earn quick money, but do you know that there is an openly discussed tip and could become your headstart in the share market. For those who know, yes, I am talking about IPO. Let’s discuss what is an IPO and how can you earn some quick money with it
What is an IPO?
Whenever a company wants to go public, they issue an IPO. A public company is an entity whose shares are traded in the stock exchanges, and ordinary people can buy and sell them. In an IPO, different Category of investors bid for the allotment of shares. Once the bidding is complete, shares are allotted based on Category and lottery. Those who have got the allotment to get their shares credited in their Demat accounts, and others get their money back. Once all of this is complete, a day of judgement comes when the Stock gets listed in the exchange. Based on the demand, a list price is calculated on the day of listing, and if you are lucky enough to both get the allotment and reasonable listing price, you can square off your investment on the day itself to book a good profit.
How to pick an IPO?
The short answer to this question is the same as picking any other stock, i.e. research and analysis. But there is a catch, picking IPOs are much easier because of the hype in the market. You can find a lot of videos about the company’s technical analysis to understand the basics. The second thing that you have to look for is a Gray Market Premium(GMP). GMP can be a great indicator of how the market is evaluating this IPO, and the higher is the GMP, the higher are the chances of good listing gains. You have to wait for the last day of bidding to see how the market responded in the previous few days and how much the IPO subscribed. The higher the subscription, the higher is the chances of enormous listing gains and lower the chances of allotment. By checking these three things, you can keep your money safe and pick a profitable IPO.
How to Increase your chances of allotment?
It is not easy to get an allotment in an oversubscribed IPO, but you can increase your chances by keeping the following checks in place. Always bid at the cutoff price to ensure you are not eliminated because of the lower bidding price. You can also select your category wisely, as different categories have different allotment criteria. Some categories use a lottery system to choose among applicants, while others allot in the ratio of no applied shares. Finally, you can increase your chances of allotment by applying through multiple accounts of your family members.
I started my journey in the share market with the IPO of SBI Cards, and I got the allotment. But the sad part was the timing of the IPO; it was the time when the news of the Covid-19 virus has started coming, and in future speculations, the market was not performing well. Due to the bad market sentiment, I end up losing a good amount of money. Afterwards, I stopped applying in the IPOs, but once I heard the news of my friend had got four-bagger in an IPO. It was Burger King, and the share achieved this price in just three days. This motivated me for applying for the subsequent IPO, which was of Mrs Bector. I applied using two accounts of my brother and me and got the allotment. The share listed at around twice the price, and I sold all my units on the day itself. This was my first truly positive experience in the market and made me a good amount of money. The incident motivated me to learn more about the markets and brought a new wave of hope to do something great with my money.
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