A Case for Only Investing in Stocks that can double, triple, or more

Follow me on Twitter: @mrjivraj

Capitalism is brutal! Companies stall, change, fail, or go bankrupt all the time. Hence investing is risky. If there is one thing that the Financial Crisis taught us, it’s that large well known companies can be just as risky as smaller ones. So why invest only in “perceived to be safe” large companies, with not much upside?

Look, you will make mistakes when you invest. So you need your winners to offset these mistakes. The only way to do that is to have large winners. You need to make significantly more on your winners than your losers. That’s why you should focus on companies that have the upside to double, triple, or more. In fact, with such math, you don’t even have to be right the majority of the time in order to generate a good return.

One of my pet peeves is to read an investment pitch, where the author embarks on an elaborate, logically thought out rationale for why a stock is undervalued, only to reveal that their price target is only 20-30% higher than the current price. In my mind, investing in such companies isn’t really worth the risk, especially if you have a long investment horizon. 

Investing in stocks is pure risk. If you aren’t looking to invest in stocks that can double, triple or more, then you likely aren’t getting paid enough to take on all the risks of something going wrong.

Follow me on Twitter: @mrjivraj

If you enjoyed this article, please subscribe!