What is an IPO? And How Do I Get In On One?

When an IPO is first distributed, it is generally done in rounds, so as to allocate the shares amongst all interested participants evenly. They are usually distributed in rounds of 100 shares each until all orders are filled. Again, check with your broker regarding it's policies.

Be forewarned about reselling your IPO stock quickly, also called "flipping" the stock. Your broker will encourage you to hold on to your stock for a while, probably 30 days. While there is no rule that says you must hold it, you'll probably be refused access to other IPO's by making a habit of this practice. The companies going public want long term investors, not "day-traders" who are going to make their stock even more volatile than it already is. If your broker gets a reputation for having clients that flip stocks, they, too, can be shut out of future offerings.

Don't be confused, though, that this is a rule for all investing. Institutional investors can flip stocks all they want. Although we do agree that that is very unfair, we don't worry about too much, as we always advocate long-term investing, and wouldn't advocate flipping anyway.

A little warning when looking to invest in an IPO. Don't get swept up in the hype. An IPO, even though it may seem like it, is not a once in a lifetime opportunity. Don't forget that company will be available on the open market very soon. If you don't get in on the IPO, don't be ready to fork over too much cash to get in on it at what may be an overvalued price. If the stock is worth owning, it will be worth owning just as much in a week, a month, or even a year. We didn't get in on the Microsoft IPO, but we still believe it's a great stock to own, years later. And there are IPO's we are glad we didn't follow the hype on!

For more info on IPO's Visit: IPO Central and IPO Monitor

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