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Invest in IPOs with ETFs

Want to invest in newly listed companies without having to follow the financial news? There’s a simple solution: try exchange traded funds, or ETFs. These funds are traded on stock exchanges and track the performance of a stock index. In concrete terms, an IPO ETF holds stock in several newly listed companies (generally within two years of their IPO). These instruments have a number of advantages compared with directly investing in newly listed companies. First, they are passively managed and therefore require little in the way of time and expertise. They also allow investors to diversify a portfolio efficiently by spreading risk across different assets. Lastly, ETF management fees are low, resulting in low costs. Renaissance IPO ETF, for instance, tracks the performance of several large, newly listed US companies, such as Spotify, Roku, Uber and MongoDB. At 31 October 2019, that ETF was up 28% on the previous year.

Five ETFs that specialise in IPOs

RENAISSANCE INTERNATIONAL IPO ETF

This ETF holds non-US companies that have been public for less than two years.

FIRST TRUST INTERNATIONAL EQUITY OPPORTUNITIES ETF

This ETF holds the 50 largest companies that are domiciled outside the US, during their first 1,000 trading days.

FIRST TRUST IPOX EUROPE EQUITY OPPORTUNITIES ETF

This ETF holds a selection of European companies during their first 1,000 trading days.

RENAISSANCE IPO ETF

This ETF holds US listed companies during the first two years after their IPO.

FIRST TRUST U.S. EQUITY OPPORTUNITIES ETF

This ETF holds the 100 largest US companies during the first four years after their IPO.

 
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