Benefits of Investing in IPOs through Your Demat Account: A Complete Guide

Among the various ways of investments that have become popular, IPO investments seem to be the talk of the town. An IPO or Initial Public Offering is the process through which a privately held company decides to go public by offering its shares to the public for the very first time.

The shares of a privately held company are usually with the company’s owners and sometimes their family and friends.  Sometimes a few of the company stakes might also be invested parties like financiers or venture capitalists. 

Inventors can easily invest in IPOs with the help of their demat and trading account as the process is extremely easy and there are tons of benefits to it too. That is exactly what we will be talking about this time around.

Process of Reaping the Benefits

Here are a few ways through which investors can use their Demat account to reap the benefits of the IPO:

• Since investing in stocks is a long-term option, it has several advantages to boast

• Stocks help investors enjoy steady growth over a particular time

• Apart from this, investors also have the benefit of earning dividends through the shares they have invested in via the IPO

• IPOs have the potential to offer huge returns and are lower risk when compared to other investment options

• Even if you are new to the IPO world, starting with smaller stocks can help

• Once you have determined that the company is doing well, you always have to option of purchasing more stocks to increase your profit

• Investing in an IPO can also help investors gain capital appreciation

• This can be done by selling stocks after the listing when it reaches a higher market price 

• Like any other investment in the share market, an IPO can also be traded on the stock exchanges

• An IPO’s listing price on the exchange dictates its premium or discount compared to its issue price

The Benefits

With the help of an IPO, companies can raise funds even with issues like a bank's refusal to lend money to companies. Some major benefits of investing in IPOs through your Demat account include:

1. Greater Liquidity

• Upon going public, investors are allowed to sell the company's stocks on the share market. 

• The shares do not need to be repurchased by the investors to make gains on an IPO

• Once a company is public, its shares can easily be bought or sold at any time, thus leading to better liquidity for the investors.

2. Diversification

• Since the shares of a public company can be traded on different exchanges, no one investor will end up with a majority of shares of the company 

• This creates diversity in the kind of investors involved in a particular company

• To add to this, investing in stocks of a publicly traded company itself adds diversity to any trader’s portfolio

3. Greater Capital Markets Access

• IPO lets companies raise capital via institutional investors 

• When a company is private the option to buy its shares is only restricted to venture capitalists or angel investors 

• When a company goes public, institutional investors can help these companies raise capital by buying their shares and adding to their profits too as the company grows 

4. Smooth Transactions

• When an investor decides to invest in an IPO, any transactions conducted get automatically credited to the investor’s Demat account. 

• This makes the post-allotment process of the IPO extremely smooth and streamlined for the investor

5. Access to Digital Records 

• Since Demat accounts hold the investments of a trader in electronic form, the same applies to an IPO investment as well

• With the help of the Demat and trading account, the digital footprints of any IPO investments made give investors easy access to transaction history

In Conclusion

When seen from a certain perspective, IPOs can be a win-win investment option for both the company issuing the IPO and the traders investing in it. The IPO helps companies raise funds without the help of financial institutions and investors get an opportunity to be a part of the company’s growth. 

When an investor goes down the Demat account opening route, they gain access to tons of investment options. The IPO investment is simply another, potentially more profitable and less risky, investment option.