(10) Investing All Or Maximum Amount Of Stock Portfolio In Single Stock
It is one of the most common mistakes of investors seeking to gain multiple returns. Multibaggers stock identification is not an easy task particularly for a new investor. It is a challenging task that requires enough skill & experience to analyze a company.
If you are successful in finding a company with high growth potential then also there is no guarantee for its performance within few years. Sometimes, the stock of even a good company can underperform for a long period of time.
In such situation, if you are invested heavily in a single company that is still underperforming then your multibagger stock identification is of no use. Several investors repetitively invest in one potential multibagger stock rather than 5 to 10 multibaggers.
In such situation, if the selected stock fails to provide multiple returns then they remain empty handed. Therefore, stock investors are advised to avoid concentrating all funds in one potential multibagger stock.
You should better diversify your funds in different multibaggers. In such situation, if the 2 to 3 selected stocks fails to multiply then at least few of them can multiply to make their losses as well.
(11) Waiting For Actual Event Or Trigger To Happen For Initiating Upward Journey
It is one of the worst mistakes of investors trying to pick multibagger stocks. Stocks can be undervalued because of many reasons. Sometimes, they are undervalued as they are not in the limelight. But, they can also be undervalued due to temporary business hurdles or economic slowdown.
Some of the common business hurdles faced by a company include excessive debt, legal issues, business or economic slowdown, loss making quarters, excessive competition in business, merger or acquisition complications, loan default & many more.
In such situations, stocks are beaten down to extremely low valuations. Several investors do the mistake of waiting for the actual event or trigger to happen until some clarity comes in.
But, once the turnaround business activity happens then it could be too late. The stock is either locked in upper circuit due to higher demand or price is not as attractive as it was before the event. This results in rapid appreciation in the stock price of concerned company.
On the other hand, investors with a high risk appetite can take the benefit of those unfavorable situations. They can easily accumulate potential multibagger stocks at the mouthwatering prices before turnaround business activities.
Therefore, investors are advised to analyze capability of company management to turnaround business from difficult times. If you are lucky enough to analyze such hidden gems then you are likely to be benefited in the long run.
Image Source: Shutterstock, Gettyimages, & Thebullsandbears
- Mistakes Of Investors Hunting For Multibaggers: Shutterstock