Initial Public Offering - Protect Yourself By Knowing The Basics Of IPO!
The key to success in an investment is to play it right: A rule familiar with every investor notable in his field. This includes primary knowledge of business, diplomacy and a meritorious demeanor.
Glancing at some of the innate tendencies of a successful investor, primarily, apart from possessing basic knowledge, he requires a businessman's insight and must be capable of drawing out appropriate programs and methods, propaganda and creating formidable allies. He must be able to handle grave situations when uncertainty arises.
In case you are faced with want for extra funds to support the increase in marketing and production, it isn't wise to turn to money lending services for credit as your returns will be used to pay off the debts leaving you at square one with neither loss nor gain. This is the stage at which an Initial Public Offering (IPO) proves effective and a good investor will be able to identify the solution.
An IPO is basically the company's first business venture with public investors involving selling the company's common shares with the idea of bringing in extra funds to support the company's growth. This method involves affiliation of investment banks as underwriters for the undertaking. The company plays the role of the issuer and will draw out a suitable scheme providing personal data involving the company's history, financial status, etc, which will be sent to the Securities and Exchange Commission for validation.
On earning the Commission's consent, the cost of these common shares are decided and are ready to be advertised among prospective buyers among the public.
The depreciation of the market does not originate around the US legislation, but during the IPO procedures. The demeanor of a successful investor is directly related to this. Business crimes have changed the face and procedures involved with IPO's and the defaulters never profit hanks to the unlawful methods they adopt to achieve success.
The following are examples of backsliding during the IPO process:
- AOL Time Warner was faced with losses during the free riding period of their IPO process causing them to introduce new ventures as compensation which differed from the signed agreement regarding the costs of the common shares.
- Enron faced more serious accusations on many of their executives involved in the IPO process for using unlawful tactics to gain profit like unrecorded alliances, bribes in exchange for international agreements and manipulation of the Texas and California energy markets. These Executives were sentenced by the court, exiled from their positions as investors. Anyone aspiring to become a notable investor must keep this in mind and play the market the way it should be instead of seeking alternative methods.
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Share Trading Techniques
Share Trading Techniques.
While perusing through one of my trading books, I came upon some fascinating facts that were very thought provoking, so I will pass them on to you.
The author is “Daryl Guppy” a well established author and successful trader as well.
He stated, that over time he noticed that once a share magazine was published that the stocks that were recommended by the magazine went into an uptrend, because the readers took notice of the tips given and bought them. Here are the statistics.
1. One month after publication 90% of the stocks mentioned were still in an uptrend.
2. Two months after publication 80% were still in an uptrend.
3. Three months after publication only around 45% were still in an uptrend.
Obviously it pays to buy the magazines each month and buy the shares mentioned.
But I personally would be watching them very closely and would be hanging on to them only till my preset profit level had been reached and I definitely would be out after a 5-6 weeks.
They would still have to qualify to my buying strategy in the first place if not I would not touch them at all.
Now a hint for you here, How I trial my” New Ideas” out is by “Paper trading.” That way I am not risking any of my money in something that I am not 100% sure of.
If you want to paper trade the places I use are www.asx.com.au and www.sharecafe.com.au both are free sites and you can find free information there as well.
Becoming a “Dividend Stripper.”
An interesting thing I found out was that apart from being share trader I have also become a “Dividend Stripper.” I shall explain this further as to what I do occasionally.
A dividend stripper is a trader who buys shares to qualify for the oncoming dividend and then sells shortly afterwards.
You buy before the “Ex Dividend” then you can sell the next day. Making sure of course you have the dates right in the first place.
But to qualify for the “Franking Credits” you need to own them for 45 plus 2 days.
1day for buying, 1day for selling plus 45 days = 47 days. Anything less and you miss out on those franking credits.
An interesting thing to note is that a stock’s share price invariably falls usually by the amount of the dividend paid after the ex dividend date expires.
Another trick is to buy the stock 2-3 weeks earlier in the hope that the share price goes up prior to ex = dividend.
A Warning About IPO’s.
The market seems to be inundated with IPO’S (Initial public offering) these new companies all seem predominately to be in the mining sector.
All eager to get in on the current “minerals boom”
A few opened up higher than the initial entry price. Most seem to be exploration of some sort or other. The flavors of the month are usually oil or uranium.
These are of course classified as “Speculative Stocks.”
Which can mean that once the cash has dried up and they haven’t found anything, they then have to either raise more cash or shut shop? And your cash has gone with them.
The rags to riches stories are many, but the road is littered with the crushed hopes and dreams of the unwary investors.
All are searching for that elusive pot of gold at the end of the rainbow.
So be wary, do your research, and don’t jump in blind. Be an informed investor.
If it looks to be too good to be true then it usually is.
Christopher Strudwick is a keen amateur share trader on the Australian Stock Market Visit his weblog for more free articles and useful information at http://www.asxnewbie.com
source:www.articlesbase.com
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