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INVESTING IN IPO STOCKS:
Overall, if you were able to buy in at their original asking price – 68% of IPO’s did go up in value the moment they hit the open market, with an average return of 12% from 2000 to 2020, and within a day, over 66% of IPOs saw an average increase of 13.6%.
BUT, if you’re an average retail investor buying in the second its available for trading – you’re not quite as lucky. In THAT case, only 48% of IPO’s saw a price increase had you bought in as soon as it was publicly available, and that average gain was only a modest 1.3%.
Over 3 years…it was found that 64% of IPOs were UNDERPERFORMING the overall market by MORE THAN 10%.
BUYING THE MOST REPUTABLE BRANDS:
Over one year, on average…those top 10 companies outperformed the SP500 by nearly 1%….over 3 years, that increases to 3.6%…over 5 years, it’s 16.2%…and, until date…those most reputable companies have seen more than a 50% higher return than the SP500.
THE BEST COMPANIES TO WORK FOR:
After one year, the top 100 best places to work BEAT the SP500 by nearly one percent, on average. That return increases SLIGHTLY if you limit your investments to the top 50 or top 10 places to work…and, if you had only invested in the BEST place to work….you would’ve seen a 10% higher return than the SP500, on average.
Over 10 years…that difference continues to magnify. The top 100 best companies to work for outperformed the SP500 by 18.8%…the top 50 by 26.6%…the top 10 by 33.9%…and the best by 131%.
INVESTING IN HEDGE FUNDS:
Hedge funds wound up UNDERPERFORMING the SP500 by roughly 200% in both a 10 and 20 year timeframe…and from 2011 to 2021, the SP500 performed 265% BETTER than the average actively managed fund.
Why? RISK MANAGEMENT.
A Hedge Fund’s goal isn’t ALWAYS to outperform the market and make crazy wild returns…because, lets be real: to do that takes substantial risk…and, for large endowments, insurance companies, and individuals who just want to PRESERVE their wealth and grow it slowly…a HEDGE fund is a way to do that, on a big scale.
Or, basically…in short…it does seem like there are viable factors that would help generate higher than normal returns, including strong brand recognition, happy employees, and buying their stock before it hits the open market…but, by and large…those theories still aren’t tested over more than a few decades decades, during a time where tech predominantly dominated the market…and that might slightly skew the results.
So, for most individuals…it’s still probably a better idea just to ride the overall market, and then invest a smaller portion throughout riskier stocks IF you have the appetite to try to beat the market.
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