Ask Matt: Should I invest in IPOs?

Q: Should I invest in IPOs?

A: Companies just sold the most new stock in a day than any other this year. But don’t expect investors rush for a piece of initial public offerings unless they get a sweet deal.

Just 31 companies sold new shares to the public this year, which is less than half the number that did at this point last year. 2015 was already a weak period for IPOs - with the number of deals down 38% from 2014. Returns have also been disappointing. Nine of the past 100 IPOs are down 60% or more, according to IPOScoop.com. Some investors might think the’re smarter than the pack and can pick the good IPOs, and certainly, there have been some huge winners. Three of the past 100 IPOs have more than doubled, IPOScoop says. But those were all pretty obscure stocks, like lead recycler Aqua Metals (AQMS), biotech Editas Medicine (EDIT) and health care company AveXis (AVXS). These severe extremes highlight the risky nature of IPOs and why they’re not well suited for most individual investors with long-term portfolio goals. Those determined to still play can consider the Renaissance IPO exchange-traded fund (IPO), which invests in a basket of new issues. But even it is down nearly 20% over the past 12 months, trailing the S&P 500’s roughly 2% decline during the same period.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.