Can you stomach multibaggers?
In this issue:
» It's not going to be cake walk for Asia
» Bin Laden has cost US a bomb
» A new measure to tap black money
» Loans are set to get dearer
» ...and more!
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The good news is that you often bump into multibagger stocks. Most of you who have been in the stock markets for a decade may have witnessed so many stocks going through the roofs. You may have even held them in your portfolio at some point in time. You may have made money on them, you may have lost some.
Now the bad news. Despite trading in those stocks, you may have still missed their "multibagger" ride. Ever wonder why? What is it that deters you from riding a multibagger?
One major problem lies in the way you look at a stock. Do you think of it as a quick and easy gambling machine where the price quote changes every few seconds? Investors who share this view of stock markets think and live in the short term. They become too excited if the stock they have bought starts rising too much. A combination of enthusiasm and fear often causes them to sell prematurely.
Investors who focus too much on the stock price and not the intrinsic value will certainly fail to ride multibaggers.
But there is an alternative way to look at stock markets. Imagine buying an ownership stake in the company. Do not worry even if it's a very miniscule share. Think like an owner. How's the business doing? Are the managers doing a fine job? Do you see the company growing profitably in the future? This thought process will force you to think long term. Because real business does not fluctuate every single day the way a stock market price graph does. You will be forced to look away from daily prices to the real worth of the business. And if all goes well, you'll find yourself proudly riding a multibagger.
Do you think this business-oriented, value-focussed, long term approach to investing will help you ride multibaggers? Share your comments with us or post your views on our facebook page.
01:11 | Chart of the day | |
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Clearly, all may not go as per plan. What if China implodes and starts growing at 5%-6% instead of the high single digit growth it has become so accustomed to. Furthermore, what if we get too carried away by the strong growth and turn a blind eye to challenges that later on scale up to unmanageable levels. If not any other country, this certainly is a big risk that the likes of India face. Agreed, that the continent's growth cannot come to a screeching halt. But then the danger that Asia could fall in the Latin America type middle income trap, cannot be ignored either. Thus, there is a long way to go before the bubbly is uncorked. Asia's time in the sun is certainly probable but it would be a mistake to call it preordained.
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Over the past ten years US' defense spending has doubled, rising to almost US$700 bn in 2010. This works out to around 20% of the entire federal budget. Spending should have been offset by either raising taxes or with cuts in other areas. But this was not the case, leaving the United States with a US$ 14 trillion debt problem. So, Osama may be dead, but he has cost the US a 'bomb'.
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In the past few months, there has been a lot of hue and cry over the disclosure of names of those having loads of black money in Swiss bank accounts. The whole exercise more or less turned out to be a damp squib. However, the Government is under huge pressure from all quarters to address the concerns. Under such scenario, we hope the whole thing is not just a facade to keep the pressure under control for a while.
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The RBI is giving banks no leeway on the provisioning front as well. It has been barely a month since the RBI withdrew the 70% provision coverage norm. But yesterday, the central banks imposed higher provisions on non- performing and doubtful loans. These are certainly keeping the risk of slippages in mind, given the higher interest payouts. Some banks believe that the higher provision norms would be better than an ongoing coverage of 70% on all gross NPAs. But the same would certainly come at a higher cost to most banks. Those that fail to wield the pricing power to pass on the rate hikes and provision costs may have to brace for lower margins in the medium term.
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Though Mr Rogers' scathing accusations may seem a bit exaggerated; they nonetheless resolutely point at the massive goof-ups done by US policymakers.
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04:55 | Today's investing mantra |
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5 Responses to "Can you stomach multibaggers?"
Sakharwade
May 4, 2011I am not sure if the proportion of investor transactions on a given day is sizeable ftraction of total trades.
The fluctuations reflect largely the sentiments contributed by traders rather than investors.
So, traders drive the market trends.
Digambar Kulkarni
May 4, 2011When a multibagger starts rising. sell and repurchase when it rises to a predecided level say 25%.
This way you will spend for Brokerage but the profit will be in your bag regularly.
When it falls belowa predetermined level say -10%, sell it off.
This way one can earn profit with security.
thangaraju
May 4, 2011Though multi-bagger is to stay long like owners, what about profit booking and getting certain return every year?
Usha Kashyap
May 4, 2011Yours is a sane and solid advice. This has to happen this way and none else. Alas, because of our our focus on short term profits, we miss the opportunities galore.