IPO Investment Mistakes: Whenever a big IPO hits the market, the excitement is hard to miss.
WhatsApp starts flooding with tips, Instagram reels talk non-stop about GMP (Grey Market Premium), and people around you begin saying things like, “This one will double your money!”
But here’s the real question—do stock market experts invest like this?
The answer: Not at all.
Legendary investor Warren Buffett says the stock market is like a game—you don’t need to swing at every ball. Especially when it comes to IPOs, he believes in taking careful and thoughtful steps.
1. Don’t Get Carried Away by the Hype—Understand the Business
One of the biggest mistakes new investors make is blindly following trends.
Warren Buffett says: Never invest in a business you don’t understand.
Just because a company is getting media attention or is trending on social media doesn’t mean it’s a good investment.
An IPO is not a lottery ticket—it’s more like buying a share in a local shop.
Would you put your hard-earned money into a shop without knowing how much profit it makes?
2. Avoid Falling for Insider Advantages
An IPO can be like a card game—the promoters and early investors know all the cards, but you don’t.
They have access to detailed information, while retail investors usually only see a shiny brochure.
Buffett says: If you don’t know who the weakest player in the game is, it might be you.
So, read the DRHP (Draft Red Herring Prospectus) carefully.
Check how many shares the promoters are selling. If they are selling too much, that might be a red flag.
3. Always Check the Company’s Track Record
Buffett prefers companies that have performed well over time.
New companies might look promising, but they often lack a proven history.
Think about Paytm’s IPO—it got massive attention, but the stock fell quickly after listing.
Before investing, check if the company is actually making profits, or just making big promises.
4. Stick to What You Know
If a tech startup is launching an IPO and you don’t understand its technology or business model—just skip it.
Buffett says: There’s hidden risk in anything you don’t understand.
Invest in sectors you’re familiar with—like banking, FMCG, retail, or others where you know how the business works.
This rule is not just for investing—it applies to life decisions too.
5. Look for Brand Value and Monopoly Strength
Buffett loves companies that have a strong monopoly or moat—a unique feature that gives them an edge over competitors.
Every new IPO claims to be “different” or “unique,” but you need to ask:
Does it really have something that others can’t easily copy?
If not, it may not succeed in the long run.
6. Don’t Get Tempted by Listing Day Profits
Many IPOs are priced in a way that benefits promoters, not investors.
Buffett reminds us: Price is what you pay, value is what you get.
Investment bankers often set the price high to raise more money.
If the IPO is overvalued, there may be little profit left for you.
So it’s better to wait for a good company at a fair price, rather than rushing in.
7. Track the Company After Listing
Buffett’s biggest strength is patience.
He doesn’t invest in every IPO—instead, he tracks companies for a few months after they list.
You should do the same.
Create a post-IPO watchlist and observe how the company performs over the next few quarters.
Look at profits, management quality, and how the business grows.
Invest only if the fundamentals remain strong.
Be a Long-Term Player, Not a Shortcut Seeker
India’s IPO market is like a T20 match—fast, exciting, but unpredictable.
Buffett’s style is more like a Test match—calm, steady, and focused on the long game.
If you truly want to succeed in the stock market, follow Buffett’s strategy:
- Understand the business
- Be patient
- Don’t believe every shiny thing is gold
Focus on long-term growth, not short-term hype.
Because in investing, slow and steady wins the race.
