IPOs - Speak The Basics (Very Good Reading) (1)

In the sometimes mundane world of investing, initial public offerings are shrouded in mystique.

The world of newly public companies, after all, remains off limits for most individual investors, although that is slowly beginning to change.

Apart from the sex appeal and the potential for big returns, however, investing in IPOs is risky business.

One simple fact anybody interested in jumping in the new issue market should know:

Year in and year out, IPOs have historically underperformed the broader market.

Obviously, investors need to get beyond the allure and hype of IPOs and become educated about the facts.

Following are some definitions of terms commonly used in the IPO market.



"By Darren Chervitz, CBS MarketWatch"