A: IPO stands for initial public offering. The first time a company sells stock to the public. An IPO is a type of a primary offering, which occurs whenever a company sells new stock.

Some IPOs are genuine businesses with real earnings and honest prospects to grow and earn a profit. These are the only ones to really consider. Other new stock offerings are businesses with great promise but too little to show for it in the way of profits at the present time. And then some IPOs are just the result of two guys and an idea. These are the start-ups. The idea may be great but there's no proof that they can turn it into a business.

Many IPOs stocks show a profit over the first 30 days. The odds are slim that most investors can get their hands on these new stock offerings until they start trading on the stock exchange. Generally your broker has to be part of the underwriting syndicate and you have to give your broker a lot of business.

Unless you are an experienced investor, you should stay away from IPOs until the stock has been on the market for a while and the company has at least a two to three year trading history. But if you just can't help yourself, then only invest an amount that you are prepared to see drop in value or even lose.