InvestNow News – 22nd Nov – Fisher Funds – Exciting new companies do not always make great investments

Chris Waters , Senior Investment Analyst — International Shares

Chris Waters – Senior Investment Analyst — International Shares – 20 November, 2019

Conventional wisdom is that burgers and cannabis are probably bad for our health. However, with recent breakthroughs in meat-alternatives and medicinal cannabis products – opinion seems to be turning. However, we still think that investing in IPOs in the current market might not be the best thing for your financial health.

Last month, Ashley spoke about the recent rise and fall of WeWork, and how the collapse of its IPO saved retail investors from buying into this overvalued and over-hyped business.

People often ask us whether we are investing in one of the new IPO’s, where a company lists on a stock exchange for the first time. There have been many successful IPOs over the years like Amazon, Google and Facebook. But many more have not been so successful. In fact, over the last ten years an index of IPO’s has underperformed the broader market, while having higher volatility in returns. We think that lower returns and higher risk is not a great formula for successful investing.

Many recent IPOs have exhibited bubble-like behaviour. And like all bubbles, they eventually burst bringing stock prices and unfortunate investors down with it.

Investors need to avoid, or tread carefully around these areas, and we think active management can really help in this environment.

Exciting new companies do not always make great investments

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