Are you new to the Indian stock market and looking to understand the concept of multibagger stocks? In simple terms, these are stocks that can potentially give multiple times returns on the investment made, making them a popular investment option for many investors.
Typically, multibagger stocks are associated with small or medium-sized companies, also known as small-cap or mid-cap stocks, which have the potential to grow rapidly. These companies may have recently gone public through an Initial Public Offering (IPO) or may have been in business for some time but are not yet widely known.
When a private company goes public through an IPO, they hire an investment bank to act as an underwriter. The underwriter helps the company determine the offering price and sells shares to the public. After the IPO, the shares start trading on the stock exchange, and their price fluctuates depending on the company's performance. If the company performs well, the stock's price can go up, leading to higher returns for investors.
However, investing in IPOs comes with a higher risk as well. These stocks are often associated with high volatility, and it is not uncommon for their prices to fluctuate rapidly. Therefore, it is crucial to do thorough research before investing and have a good understanding of the company's fundamentals.
The Securities and Exchange Board of India (SEBI) regulates the IPO process and ensures that investors are protected from fraudulent activities. It is essential to invest in companies with a strong track record, good management and a promising future to reduce risks.
To achieve a multibagger in the portfolio, you have to be able to hold a multibagger in the portfolio and holding can be painful. Multibagger stocks don't just go up, they also go through long periods of stagnation. You will have to hold while the stock doubles in a year. You will have to hold as the stock pulls back 50% from its highs. You will have to hold as the stock goes nowhere for months, maybe years until fundamentals and valuations converge. As long as the business keeps growing EPS, the stock will eventually hit new highs.
In conclusion, multibagger stocks can be a high-risk, high-reward investment option for investors in the Indian stock market. It is important to understand the potential returns and risks associated with investing in such stocks and do proper research before investing. By doing so, investors can potentially generate significant returns and avoid losses in the stock market. Liquide can provide you with professional guidance for trading in the stock market. With the Liquide App, investors can access real-time analysis and recommendations from financial experts, manage their portfolios, track market trends and receive personalized investment advice based on their risk tolerance and financial objectives. The Liquide App is readily available for download on both Google Play and Apple App Store.