MONEY MATTERS : SHOULD YOU INVEST ON INITIAL PUBLIC OFFERINGS (IPO)?

This post is apt this month as PSE opens its doors to another initial public offering (IPO) by the name of Cemex Holdings Philippines Inc. (CHP). Pardon the specifics for CHP but if you want more information, feel free to visit these sites. This is interesting because these 2 articles present 2 sides of a coin:

• http://www.alphainvestments.ph/cemex-ipo-not-opportunity/
• http://business.inquirer.net/211504/cemex-ipo-priced-p10-75

I'll leave the nitty gritty details with you but here are my thoughts on IPO as a whole:

 * Because there are no precedent for IPOs, it's difficult to predict the market. That's one of the risks one has to take when investing on these type of stocks. It's not a blue-chip but it's not a trash stock either. Nobody knows just yet. You have to bet in one way or another. However, don't dive into it blindly. Once Securities and Exchange Commission (SEC) approved the first trading date, several news clips will go around via usual channels.

* As IPO's are inherently volatile, the potential for growth is immense compared to its old timer competitors. I personally have much of my gains from IPO but you know the usual caveat: there's no absolute law in stock investing.

* Previous cases*: Jollibee's (JFC) IPO price was Php 7.00 per share now it's trading above Php 230 (after 10 years). Double Dragon's (DD) opening price was Php 7.00 (I think) now it's Php 60-ish after less than 5 years. Think about it: if you've set aside a portion of your savings and invest in these stocks, you're looking at 900% (your money x 9) by now. *All amounts are approximates. Check Bloomberg for exact prices.

Some tips:

1. Invest with an amount that you're comfortable to part with.
2. Set a specific target (say, if I doubled my money, which is 100% return, I'll cash it in).
3. Whenever you can, trade on the first day, first hour. With online banking, that's possible.
4. This may sound a bit controversial but depending on your conviction - give back. It can be a tithe, charity, whatever.

To answer the question above, I think we should participate in IPO's. It's a good avenue to grow your funds. I personally have invested on different types of instruments and I can say factually that direct stock market investment yields more gain than any other vehicles. Truth be told, I've been seriously thinking of redeeming my shares on some of my mutual funds and UITF. However, that's a separate topic altogether.

How's your finances? Remember, don't be disheartened by how tiny your startup money is. What's important is you're doing something to grow your funds, in the best way you know how. -CMK