Do you want to have the kind of returns the stalwarts in the investment world get from multi-bagger stocks? Well, you will have to follow their winning strategies to accomplish that. Keeping things simple and having a lot of patience are the key factors to gaining from multi-bagger stocks.
As for the other winning strategies, discuss them with the Best investment advisor in India and strictly follow them.
Do’s and Don’ts
Ideally, there are a few specific things that you should do and a few that you should avoid for successful investing in multi-bagger stocks.
Therefore, knowing the do’s and Don’ts is the most crucial factor.
Do’s
- Know your strengths: The best investment strategy is usually built on the investor’s strengths. Therefore, know your strengths and play around them.
- Be confident: Invest in the stocks of only those companies or industries you know and are confident about their potential.
- Due diligence: Always act after conducting thorough research on the specific company. Due diligence will pay you rich dividends in the long run.
- Focus parameters: Look for the future growth potential, earning prospects, track record, cash flow, and leverage comfort, strength, efficiency, and reliability of the management team.
- Consider the size: Large companies may be very tempting, but their moves and return ratios are small compared to the small companies that are mostly undervalued.
Don’ts
- Do not speculate because that is not investing. You may win or lose in stock trading but do not consider it a gamble.
- Refrain from following the crowd and investing in what everyone is going for. Instead, think about the stock’s inflation, profits, and earnings. Remember, anything hot and trendy will soon pass.
- Do not sell your holdings too often. Hold good stocks for 5, 10, 15, or more years. Since the volatile market, going long will increase your tolerance if it has any adverse effects.
- Do not rely on information from unreliable sources and take any action.
Company Selection
Know companies’ different categories and classifications and then choose the category that suits you best and serves your purpose. You may consult with the Best investment advisor in India for professional expertise.
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- Slow growers: The stocks of the big and old companies have earnings almost the same as the GDP. You can invest in them for dividends, but check their history for consistency and payout ratio.
- Fast growers: Though their growth potential is very high, check their balance sheet first and judge their future growth potential. Invest at a P/E equal to or less than the growth rate.
- Stalwarts: These companies do not have a high but reasonably fast growth rate. You can invest in their stocks if you are sure that they can maintain the same growth rate and offer them at a realistic P/E.
- Cyclicals: Different macroeconomic factors determine the sales and profits of these companies. Since they increase in cycles, buy their stocks at the best time – during a recession or a vibrant economy.
- Turnarounds: Companies that fail but have the potential to come back fall into this category. If you want to invest in their stocks, look at their current debt and management plans.
- Asset Plays: Companies with enormous assets fall into this category. They are also good to invest in, but check their current debts and whether they have plans to take on more debt since that can set off their assets.
Avoid Risks
Lastly, knowing and avoiding the risks is crucial in multi-bagger stock investing, and it requires basic knowledge about the market, current trends, and prospects. Take the help of the Best investment advisor in India to avoid confusion and make the right decision.
Learn more about the bull and bear markets to find the best time to enter or exit a market without getting caught in the bull trap. Know the resistance level and price valuations while buying the stocks to maximize the growth potential and prevent profit mutilation.
Finally, be patient and hold prospective stocks long-term to generate wealth.
Conclusion
The winning strategies for multi-bagger stock investing are pretty simple. However, the success ratio largely depends on how well you follow them.
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