Wednesday, 7 November 2018

It is always preferable to invest in compounders and growth companies than just any bargains or cheap non-quality stocks..

Given a choice:

Choose compounders and growth.

They are always better than lousy companies that are available at low prices.

Those who choose these lousy companies at low price may find many of them not so rewarding.

A few though rewarding, but they will soon realise that this strategy gives limited upsides.

Don't just focus on cheapness.

Always look for great quality growing companies to buy at cheap prices.

Seek out the ones that will give you the 10 baggers in 10 years.

What does a 10 bagger investment looks like?

$1000 invested today growing to $10,000 in 10 years.

Initial capital  $1000
1st doubling  $2000  ($1,000 x 2^1)
2nd doubling $4000  ($1,000 x 2^2)
3rd doubling  $8000  ($1,000 x 2^3)
4th doubling  $16,000 ($1,000 x 2^4)

Basically, you aim to double your capital every 3rd year.

Essentially, you need to grow your capital at a rate of 24% annually.  (Rule of 72:   72/3 = 24%)

Terry Smith:  Choose Quality Stocks Over Value Investing (Morningstar)

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