When a private company goes public, it is an exciting time for investors. That is because the company will now offer an initial public offering (IPO) for investors to buy shares of the company.

If you are confident this company has a bright future, that can feel like a huge opportunity to get in on something with major potential.

But an IPO is not the right move for everyone and does come with risks. Per a recent primer from Yahoo Finance, here are the steps you need to know to get started and invest wisely.

Who is Allowed to Buy IPO Stocks?

There is an element of exclusivity to an IPO that you might not expect. It is often people with preexisting ties to the company that will be offered the opportunity.

That includes current employees, family and friends of employees, or other wealthy individuals who already have some pre-established relationship with the company. In short, you need to be wealthy and have connections to be given the opportunity.

Do Your Homework

You can find information about soon-to-be-available IPOs by looking at the stock exchange. You can look up details about the company’s management, projections about their future, and how much shares will likely cost.

This will allow you to make an informed decision often months before the IPO becomes publicly available.

Fred Hubler, Chief Wealth Strategist for Creative Capital Wealth Management Group which offers retainer-based advice and access to accredited investments, said, “IPO’s have an “it” factor especially if it is a known company that is going public. ”The best IPO’s have been the most difficult to gain access to. For our clients, we scratch the “IPO” itch by utilizing private equity funds and also allowing access to a portal of companies who are raising capital.”

“For a small percentage of the portfolio” continued Hubler, “we have no issues with adding IPO exposure for the more aggressive client.”

Know the Risks

Even if you are eligible to buy shares of the company, and even if your research sounded like the company would continue to do well, you are still not in the clear.

You would hope that the company going public is the start of a good change for them, but sometimes it heralds a company’s impending troubles. Did they go public because things were already starting to go bad? You don’t get any guarantee with an IPO. It can also sometimes be difficult to find new information about the company based on differences in disclosure requirements.

Investing in an IPO can be an exciting step towards getting in on something that is about to take off, but it is definitely not something to pin all your hopes on. Where there’s an opportunity for big success is often an opportunity for major disappointment.

For further reading on IPO stocks and what you need to know to begin investing, check out the post Yahoo Finance did here.

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Financial advisor Tim Bohen covers how you can trade IPOs and when you should trade them.

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Want to know if you’re on the right path financially? CCWMG’S Second Opinion Service (SOS) is a no-obligation review with one of  Creative Capital Wealth Management Group‘s Wealth Strategists. 

It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.

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