As the markets start to heal, companies are once again lining up to sell shares to the public. As luck would have it, there’s an exchange traded fund (ETF) that taps into this market.
After the long dry spell of initial public offerings (IPOs), we’re beginning to see a trend reversal. Since April 1, 12 companies have gone public, and there are 70 more waiting in the pipeline, explains Jason Kephart for SmartMoney.
IPOs can be very appealing – think about Google (GOOG) to get a sense of the allure they can have. But buyer beware – not every IPO is a success and very few give great returns.
That’s what makes an ETF of IPOs such a great idea. But keep in mind that the diversification of ETFs can be both a blessing and a curse – the benefits are lower volatility and risk-reduction. On the downside, though, investors won’t have the potential for growth that they would by picking a single winning stock.
But as we said above, very few IPOs give those Google-sized returns. Choosing an ETF that holds the 100 biggest names could make your life a lot easier and give you access to the whole sector.
- First Trust IPO Index (FPX): up 21.2% year-to-date
For more stories on IPOs, visit our IPO category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.