Man, Look before You Leap
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We all want our wealth to grow. That is why we invest. Even an investment strategy, designed with emphasis on safety of principal and certainty of regular income, should include growth. Big and mature company shares tend to move at snail’s pace both in good times and bad times. Also they tend to pay dividend on a regular basis. Therefore, they are considered safe investment vehicles with potential for steady income. While we are interested in the safety of principal, we would like our principals to multiply many times over. For such kind of investment objectives, we would be better off looking at small and mid-cap companies. Because, they are the ones with maximum possibilities. Here, the investment can go both ways. Therefore, it is vital to study the business, financial, management aspects of the target companies at length. It is vital to know the business. This is done to minimize as much investment risk as possible. The astute investors who have made fortunes in this business take their time to understand the company and its products. Some go the extra mile in trying to ascertain investment merits of a company. They would go so far as to interview its competitors and their opinions are then incorporated in the analysis of the said company. They are not interested in the price increase that occurs in a week or ten days time. They are thinking long-term and big payoff. They are thinking four-, five- or even tenbaggers. Ten baggers do not happen in a few months. It takes years. Therefore, by minimizing the risk factors, you are able to increase the margin of safety. By increasing the margin of safety, you are able to give your investment a chance to become tenbaggers. Buying shares of a company with good earning record at bargain price will almost ensure a hefty return on invested capital!