People indulging in the stock market are often people with a lot of emotions. They get excited by something new, especially if it holds the promise of making them a whole lot richer and provides bragging rights at their next social gathering.
Maybe that’s why amateur and professionals alike tend to lose their minds in bull markets, particularly when a hot initial public offering, or IPO, is offered to them by their broker.
On one hand, had you bought into the IPOs of Infosys (yes, remember?), HDFC Bank, Sun Pharma, or TCS, you would have had some volatile price fluctuations along the way, but there is no question that you have made enough money to substantially change the quality of your life. Clearly, a well chosen IPO can be a life changing experience if you simply make the right choice and stick with the stock for years.
On the other hand, there is a large majority of IPOs such as those of Reliance Power, Suzlon and DLF, which have destroyed investors’ capital. With such businesses, even the “long-term” cannot save you from permanent capital destruction.