This is one of the biggest myths of all time. If you look back to the 1998 IPO listings boom, there are very few companies that are still listed today.

We conducted a study of all the new listings that took place in 2007. Of all the companies that listed in 2007 and 2008, the average return they have delivered is negative 45 percent on an equal weighted basis. In fact, only two companies are trading above their IPO price. With this track record, you would be much better off just investing in the JSE All Share Index rather than speculating on IPO?s.

The main reason IPO?s perform so poorly is that often the reason for listing is that the current owners of the unlisted business believe they can get more for the company by listing it than it is actually worth. Of course there are some management teams that list for the right reasons and with good intention, but these tend to be in the minority.

Myth 5: Volatility = risk

As investment managers, we believe our goal is to ensure that we achieve our client?s financial objectives by taking on the least amount of risk.

In our view, risk does not reside in share price changes and cannot be summarised into a single number, such as the traditional measures used in portfolio management theory.

The only risk that really matters is the prospect of a permanent loss of capital because portfolio management theory tells you nothing about the fundamentals of the companies you are investing in, their business risk or their balance sheet risk.

(Click here to learn why Personal Finance Editor Kabous le Roux believes shares are not risky at all and here to learn what risk really is.)

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