5. Investing in IPO (Initial public issue)

When the stock markets are booming the initial public offerings (IPOs) of companies is oversubscribed by 40-50 times. On listing at the stock exchanges usually the stock lists at a premium and investors make some money by selling it.

If the IPO lists at a lower price you can be stuck with a dud stock. During a bear market phase like the present one even those IPO’s which listed at a premium tend to go below their issue price and investors lose money.

Long-term IPO investors may still make a decent return over a long run, but subscribe and sell on first day is out of sight at the moment.

Invest in IPOs only when you believe in the company. Otherwise, just stay away.

Investors should realize that making money is a long-term process. However, in their attempt to make a quick buck, many suffer. While investing your hard earned money in the stock market in 2009, make sure that you avoid these mistakes. Wishing you very happy and prosperous 2009.