Why We Don’t Chase IPOs
By: Karen Oeser, CFA®, CFEI®
From time to time, a high-profile company captures headlines and client attention as it approaches the public markets. We’re seeing that again now, and it’s a good time to share how we view IPOs.
At Means Wealth, IPOs are not part of the portfolios we build or recommend. That’s not an oversight, it’s a deliberate decision rooted in how we invest and who we are as fiduciaries.
Our investment philosophy is centered around a long-term strategy that is evidence-based and grounded in discipline. We build portfolios primarily using broadly diversified equities, low-cost index funds, thoughtful asset allocation, and consistent rebalancing, not by trying to capitalize on one-off events, market excitement or timing.
IPOs, by contrast, are exactly that: event-driven, single-company bets with limited public history and a tendency toward significant early volatility.
As illustrated in the chart below, a sample of recent, high–profile IPOs experienced strong initial demand and notable early price volatility, followed by a wide range of longer–term outcomes when compared with broad market indices.
There’s also a practical reality that often gets overlooked. Often, IPO allocations are concentrated among institutional investors, company insiders, and clients of the underwriting firms themselves. What’s left for the broader market is often limited, inconsistent, and comes with pricing and timing disadvantages. In many instances, by the time IPO shares become broadly available, a portion of the initial price movement and associated volatility may have already occurred (outcomes vary materially depending on the specific offering, valuation, and prevailing market conditions).
As a fee-only fiduciary, our role isn’t to provide access to every opportunity, but to apply judgment. Clients rely on us to bring discipline and perspective: to help tune out the noise, not to participate in every market headline. Introducing IPOs into portfolios would mean stepping outside that process which is designed to participate in the long-term growth of companies without needing to predict it upfront.
In our portfolios, exposure to newly public companies is generally obtained through broadly diversified, low-cost index funds. These funds may include companies after they meet applicable index inclusion criteria, allowing for participation over time without making timing-based investment decisions or assuming risks unique to IPOs.
So, our stance is simple: we don’t pursue IPO allocations, and they are not part of our recommended strategy.
If a client is interested in a specific opportunity, we’re always happy to talk it through. Those conversations are educational by design, with the understanding that these types of investments sit outside the portfolios we manage and the strategy we stand behind.
Staying disciplined, especially when markets are excited, is a core part of our approach.
And that consistency is central to how we serve our clients.
This material is provided for educational and informational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security, including initial public offerings (IPOs). The views expressed reflect Means Wealth’s investment philosophy as of the date shown and are subject to change. References to IPOs, market performance, indices, or third-party information are illustrative only; past performance does not guarantee future results, and no investment strategy can ensure success. Information obtained from third-party sources is believed to be reliable, but Means Wealth does not guarantee its accuracy or completeness. References to third-party publications or data providers do not constitute an endorsement. Means Wealth Management is an SEC-registered investment adviser; registration does not imply a certain level of skill or training.
