Stock Chat: IPO Subscriptions Have Far Higher Safety Coefficients Than Trading IPOs

New stocks are starting to be issued one after another. For investors, participating in IPOs is currently the best option. Although the chance of winning is low, the expected returns are high. In contrast, blindly speculating on new stocks carries higher investment risks. For new stocks, the optimal long-term investment timing is generally not at the initial listing but after the market has cooled down.

From an investment perspective, IPO participation is a primary market subscription activity. Investors buy at the issue price, which has already taken into account industry standards and company fundamentals, leaving reasonable room for the secondary market. This process does not rely on short-term market judgments or constant monitoring; investors simply subscribe according to the rules, and if they win, they pay. The entire process is transparent, with risks effectively locked in. Even if the market experiences temporary fluctuations, the principal safety margin for IPO investments remains much higher than trading in the secondary market, meeting the needs of conservative investors.

On the other hand, speculating on new stocks after listing involves chasing price increases. Stock prices are heavily influenced by market sentiment and short-term liquidity, making them prone to deviation from fundamentals. While investors may seem to profit quickly, they actually face risks of larger-than-expected drawdowns.

The risks of speculating on new stocks mainly concentrate in three areas. First, in the early days of listing, stock prices can be driven up by speculative funds, causing valuations to quickly detach from reasonable levels. During the subsequent correction, chasing high prices exposes investors to significant risks. Second, turnover rates are high in the initial period, and stock prices lack stable support, making it difficult for ordinary investors to time their buy and sell decisions amid large price swings. Third, the company’s performance and operational stability are still under market verification, and long-term growth prospects are uncertain. Early stock price performance does not reflect the company’s true value. Entering at this stage is essentially a gamble on market sentiment rather than value investing.

Many investors only see the potential for quick high returns from speculating on new stocks, but they overlook the imbalance between risk and reward. IPO returns are probabilistic and relatively certain: although the win rate is low, once successful, the profit probability is high, and there is no need to bear additional volatility risks. Speculative gains, however, are uncertain and based on market gambling; they may seem to offer short-term gains but carry a higher probability of losses, with difficult-to-control loss sizes.

For ordinary investors with limited funds and moderate risk tolerance, participating in speculative trading on new stocks not only risks losing their principal but also causes missed opportunities for steady gains through value investing. This greatly reduces capital efficiency.

From a long-term investment perspective, the optimal timing for new stock deployment is never at the initial listing. When new stocks first go public, market attention and speculation are intense, and stock prices often include a large emotional premium, making it difficult to determine a reasonable valuation based on fundamentals. Only after a period of trading and market digestion, when stock prices detach from emotional influences and are supported by company performance, can rational investment be considered. At that point, investors can avoid short-term volatility and share in the company’s growth at a more reasonable price.

In capital market investing, stability is always the foundation for long-term survival. Currently, with steady new stock supply, IPO participation remains the most cost-effective choice for ordinary investors. Investors should stay rational, focus on IPOs, avoid blindly speculating on new stocks, and not be tempted by short-term gains. Allocate funds to low-risk areas, wait until valuations of quality new stocks normalize, and then plan for medium- and long-term growth. This approach ensures capital safety and reasonable returns—representing the correct path for value investing in new stocks.

Beijing Business Daily Commentator Zhou Kejing