Finance Monthly - October 2021

54 Finance Monthly. Inve s tmen t 3 to 6 months appears to be best for holding IPOs in the short term. However, in the long term, IPOs tend to perform poorly. For the 258 UK IPOs studied, Stockopedia’s researchers found a negative median compound annual growth rate of -4.3% across five years. Small-cap IPOs that are typically under-researched and less anticipated by the market outperform mid and large- cap IPOs on nearly all metrics assessed. Throughout the last five years, the average performance of small caps sat at 85%, while large caps saw a negative performance of -20% one to two years after the IPO. Interestingly, in a joint survey of 1,200 private investors conducted by Stockopedia and Interactive Investor, 33% of respondents said they had or would invest at an IPO for long-term growth, while 23% said they would invest for medium-term growth. Just 16% of respondents said they would invest to make a short-term profit. Although companies that float can vary widely, based on Stockopedia’s research, it appears that many private investors are putting their capital at risk through a lack of IPO knowledge and understanding. Final thoughts While plenty of private investors have successfully bought into IPOs, it’s important for any private investor, new or old, to thoroughly research the risks involved and keep in mind that the odds are more heavily stacked against them as an individual. “You’d want to be careful that you’re not just chasing a story or hype,” warns certified financial planner Douglas Boneparth in conversation with CNBC. “Don’t let excitement get in the way of making sure the investment you’re making is a smart one.” 1,200 Private Investors In a joint survey of conducted by Stockopedia and Interactive Investor 33% of respondents said they had or would invest at an IPO for long-term growth, while 23% said they would invest for medium-term growth. Just 16% of respondents said they would invest to make a short-term profit. DISCLAIMER: This article does not constitute financial advice. The author and Universal Media Ltd. are not qualified financial advisers. All investments are made at the reader’s own risk.