Savings accounts and IPOs – a beneficial Catch-22!

Initial Public Offerings, or IPOs, have been in the news lately. The most important reason why you ought to invest in an IPO if you have a savings account is because of the following ‘cycle of prosperity’:

1. The money from your savings account gets invested in the IPO.
2. The returns from the IPO get accrued in your savings account.
3. That money grows TWICE! (Returns from the IPO as well as the interest from the savings account.)
4. Go to step 1

It helps to be an early bird

Upcoming IPOs are the single best investment you can engage in using the funds in your savings account. Simply put, an IPO involves a private company ‘going public’ by offering shares to institutions and individuals. For this reason, the shares are about as cheap as they will ever be. What’s more, they promise returns that are enough to make you chuckle all the way to the bank.

Let’s take an example. If you had invested Rs 1000 in Amazon when the company floated its IPO in 1997, by 2018, that amount would have... no, not doubled, not quadrupled, but increased 500 times and be worth Rs 5,00,000! Granted, not all companies are Amazon, but the general idea is that your money will see serious growth if you invest in IPOs. And here’s why.

The miracle of India Rising

Indian IPOs raked in Rs 27,147 crore in 2020, the highest so far. 2021 is already set to beat that figure. With the largest young population in the world and a heavy incentive for capitalism via market reforms, India is fast becoming host to numerous companies. These companies will go public and guarantee good returns for years to come. The timing is so perfect that it can be construed as a mahurat to invest in IPOs this year.

A savings account is just a safe house

It is true that banks, especially IDFC First Bank, offer great interest rates on savings accounts. But from an investment point of view, your money can do much better. Savings accounts are fine to let your money catch its breath for a short while, but for it to grow seriously, you need to invest it in IPOs.

IPOs are an excellent long-term investment as they let you enter a company on the ground floor. As the company keeps doing well, your share value keeps going up. Even after allowing the bulls and the bears in the stock market for a year or more, all you will see is a steady increase in your investment. And now you have a portfolio!

Best deal from a company, hands down 

Companies need to make their IPOs alluring. They have to get the public and institutions interested in them. In the financial world, this translates to low investment and high returns. Their share price will seldom be as low again.

Not a quickie but a long-term affair 

Get over the fear that since you are not Warren Buffet, the intricacies of the market will be lost on you. But you’re right – making money from the share market entails understanding the day-to-day workings of the market and quite a bit of geopolitics. 

IPOs are simpler. You won’t be making a steal by buying low and selling high. You will be generating money by believing in a product or service and thereby in the company whose IPO you are investing in. This is as good an investment as a house property. It’s there, it’s growing, and you are financially secure.

Investing in IPOs in the digital age is only as cumbersome as downloading an app. Combine that with a couple of hours of serious reading, and you will be able to invest in IPOs while waiting for your morning coffee in bed. So why wait? Check your savings account. Check the IPO you have faith in, do a little research, and watch your money grow!

Disclaimer

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