PSX Investor Dos and Don'ts: What to Check Before You Buy an IPO or Share in Pakistan

Before you buy an IPO or a share in Pakistan, PSX's own list says to read the prospectus, deal only through a licensed broker and avoid off-market deals, rumours and promises of high returns. PSX publishes separate dos and don'ts for IPOs and for the secondary market.

Every year, new investors lose money to a tip passed on in a chat group. The Pakistan Stock Exchange (PSX) writes down the basic rules on its investor pages. We read those pages on 15 October 2026. This guide turns them into a checklist you can run in about ten minutes before you commit any money.

An IPO and a normal share purchase follow different rules

An initial public offering (IPO) is the first time a company sells shares to the public, at a set price. The secondary market is where those shares are then bought and sold between investors. PSX gives a separate list of dos and don'ts for each.

In an IPO you apply with a form and payment through a designated bank. A later share offer, called a secondary public offering, can issue new "right shares" or sell shares held by directors. In the secondary market, the price moves every second as people trade. The steps to apply for an IPO on the PSX cover the form itself.

Read seven parts of the prospectus before you apply for an IPO

PSX says a prospective investor must read the prospectus or abridged prospectus carefully and note seven things. Treat them as a checklist for yourself, and tick off each one before you send your IPO application form and your payment.

The right-hand column is our wording. PSX gives only the list on the left.

Six IPO mistakes PSX tells investors to avoid

PSX's IPO don'ts are plain. Do not fall for rumours, do not rely on promises from anyone, and do not invest just because the market is rising or because others are doing it. A good reputation is also not enough on its own.

1. Do not fall prey to market rumours.
2. Do not go by an implicit or explicit promise made by anyone.
3. Do not invest simply because the market or industry is rising.
4. Do not bank on the share price going up in the short run.
5. Do not invest just because others are doing it.
6. Do not invest just because the company has a good reputation. Study the details behind the issue.

In the secondary market, use only a licensed broker and the exchange

For shares already trading, PSX says to transact only through the stock exchange and to deal only with registered brokers that hold a valid SECP licence. It also advises you to complete all account formalities and avoid off-market deals.

PSX's other dos are to understand the risk, weigh return against liquidity and safety, and invest on sound reasoning from public information. Its don'ts are to avoid unregistered intermediaries, unrealistic return promises, hearsay and rumours. A new investor is told to get proper professional advice first.

If a halt stops trading in a share, the explanation of the PSX trading halt and circuit breaker shows why that happens.

PSX's investment guidelines add habits that protect your money

PSX also lists nine general guidelines. They include diversify, know your risk profile, do your homework, think long term, avoid herd behaviour and beware of scams. They also say to watch taxes and commissions, since these cut your returns.

On commission, PSX says there is no fixed rate and it varies from firm to firm. Ask your broker for the full schedule in writing. And check how dividend tax on PSX shares applies before you plan around a payout. A rule of thumb from PSX is that the higher the gain promised, the higher the risk.

Common questions about PSX investor dos and don'ts

What must I read before applying for an IPO?

The prospectus or abridged prospectus, especially the risk factors, financials, object of the issue, litigation, business, promoters and instructions.

Can I trust a tip from a friend or a group?

PSX says do not invest on hearsay and rumours, and to verify before you invest.

Should I trade outside the exchange?

PSX advises avoiding off-market transactions and dealing only through the stock exchange.

How do I know a broker is genuine?

PSX says to use registered brokers, called TREC holders, with a valid SECP brokerage licence.

What if a broker defaults?

PSX runs a compensation fund that pays up to Rs 1,000,000 per claimant after a declared default. See the PSX page for the process.

Is a company with a good name a safe IPO?

Not by itself. PSX says to study the details behind the issue.

How we verified this

What we checked, where we read it, and what we could not confirm.

Last checked 15 October 2026. The dos, don'ts and guidelines come from the PSX page of investor dos and don'ts, which we opened on that date. We did not review any live IPO. This is general information, not advice on any share. Confirm any broker's licence and fees before you pay.