I am new to stocks... can anyone tell me the average risk of an IPO? Does history indicate if IPO's are a good investment on average, or are they considered risky, if you were to stereotype??? Any idea when Face Book will go public?
Greetings gregoryb02 and welcome to the Motley Fool!You write: I am new to stocks... can anyone tell me the average risk of an IPO? Does history indicate if IPO's are a good investment on average, or are they considered risky, if you were to stereotype??? IPOs are complicated investment vehicles, and I generally wouldn't recommend them to a beginning investor. You can read all about them here:http://www.fool.com/Specials/1999/sp990316AboutIPOs.htmAs far as their risk level, here's a paragraph from the above link:'On average, IPOs make bad investments. A study by two university professors a few years back looked at 4,753 IPOs and 3,702 secondary offerings made between 1970 and 1990. In the six months following the offering, IPO firms lost 1.1%, versus a 3.4% gain for matching firms that made secondary offerings. The new issues continued to underperform over the next three years, with the gap narrowing but persisting well into the seventh year following the IPO. During the 20 years covered by the study, the average annual return over the five-year period following the offering was 5.1% for the new issues and 11.8% for the comparable firms."If you're just beginning, I would recommend considering index funds, or choosing several companies based on their fundamental values and potential for growth. If what I've just said sounds foreign, visit our "Investing Basics" section at:http://www.fool.com/school/basics/basics.htm?source=InvAgHope this helps, and good luck!Regards,Barbara Eisner BayerTMF Venus
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