Bob tells his broker to buy 100 shares of stock in every IPO that comes along, regardless of the issuer, because he has heard about the tremendous price increases in the first week of trading. Bob will likely:

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CBob is likely to lose money on average for two main reasons. First, the most underpriced issues, which are the ones that could potentially offer the highest returns, tend to be oversubscribed. This means that investors often cannot purchase as many shares as they would like at the initial offering price, and Bob might not be able to acquire a significant number of shares in these potentially lucrative IPOs. Second, Bob's strategy of buying shares in every IPO, regardless of the issuer's prospects, means he will also be investing in overpriced issues. These overpriced IPOs are less likely to be oversubscribed, so Bob may end up with more shares of these less desirable stocks, which are more likely to lose value.

Bob Tells His Broker to Buy 100 Shares of Stock