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What is an IPO?

An Initial Public Offering, or “IPO,” refers to the process when shares of a private company are first sold to the public. It is often called “going public.” Many companies – large and small – decide to go public and offer investors a portion of the ownership of their company by selling shares of stock.

As an individual investor, it is nearly impossible to gain access to a stock in its IPO before it goes public. Institutional Investors (pension funds, hedge funds, etc.) are generally given priority to purchase the stock.

Depending on the amount, investing in a new public stock may significantly increase the risk profile of your overall portfolio. In addition, timing of the purchase becomes important, as these new stocks can be volatile from day to day.

Jemma Everyday Wisdom: While IPOs often generate a lot of excitement and publicity, they may not make for a great long-term investment. Keep in mind your overall portfolio and your goals when considering an investment in a new public company.

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