Hey it’s Sasha Evdakov and thanks for joining me here on Tradersfly.com where I share with you some insight about trading and investing in the stock market. Now in this week's video what I'd like to share with you is a stock market term and that term is called the 10 bagger or the 10 bagger rule.
Now if you've never heard about this term it was really coined up by Peter Lynch in his book One Up On Wall Street. This book really defines the 10 bagger really associated to baseball bag being a base and then when you add up doing two home runs and it double you get 10.
Really the rule can be applied to any sort of investment or anything that appreciates tenfold or a ten times. For example if you had something that was $10 per share and then it appreciated ten times you would be at $100 per share.
Now if you take that same concept and you say a stock opened up for trading at $20 per share went up 10 times then that would put it at $200 per share. In other words it's a nine hundred percent increase in the investment so
Initially this concept or this term of the 10 bagger doesn't really seem that attractive or as exciting as you're just talking about hey I purchase the stock here then it went up 900% or 10 times it seems fantastic.
Really where this concept starts to get that aha!, moment really you start to realize well I don't really have to trade a lot and that's the big aha! moment that's really where you benefit from understanding this rule and concept.
Taking in account this Ten Bagger Rule or this ten better term, here's what happens if you have an investment that you go in and you go ahead and make a trade and it goes up ten times or a ten-fold so let's say you have a $10,000 investment and it goes up ten times now you're up at $100,000.
you take that same investment and do that one more time in your life and you're up to $1,000,000. So if you have 10 baggers, two home runs and a double you basically go out with a million dollars so that's from two major stock trades or two major investment and you're out one million dollars.
It sounds a lot easier in that sense, now doesn't it? because now you're only talking about making two really good and successful trade rather than constantly trading all the time. It's one of those things that now when you start thinking about, ok well I don't have to trade all the time to have a good investment or to have a good cushion or to allow my money to appreciate in the future.
Instead you just need to do the right trade at the right time and let them run. So if you take a look at the current companies and just the recent ones that have been trading in active in the last decade, there are a handful of companies that had a major increase that you could have done that ten bagger rule with to create a nice large lump sum for your investment account.
Take a look at Amazon back when it was launched or released, you could have purchased at stock right around that $30 range and allowed that to continue to appreciate.
You could have done the same thing with Autozone back in the 1998 - 1999 time-frame, even the early 2000 and had that stock at around the 15 – 25 dollar range and have it appreciate at right to around 600 to 700 dollars per share.
There's other companies like the Google's, the Apple’s, and even the Tesla's if you got in early enough would have created you a ten times your investment return and even Facebook is now starting to come into that ranged even though it's not there yet there's other companies that do a great run as they did debut and open up for trading.
Always keep your eye out for companies that are creating new highs and continue to move higher because they typically are the strong ones and the leaders.
Now, if you really understand this concept of you don't have to trade a lot, you don't have to train a lot of companies, to have a successful investment, to have a nice cushion in your portfolio in your retirement account, then it really start to calm those nerves.
Looking at the 10 bagger rule you really only need to hit two major stocks and allow those to run starting with $10,000 allowing that 10,000 to grow a hundred thousand and then after that taking that hundred thousand dollars putting it into the next investment
Then allowing it to do the same exact thing and then you go ahead and cash out with your million dollar retirement or million dollars and do whatever you please with it.
Now in order to say this or talk about the 10 bagger, it’s actually quite easy but in all practicality and actually executing, it is very difficult and real world environments and that is just because human emotions play a large toll on our investment decisions and we don't really know exactly what stocks are going to continue to run to the upside.
Hence, you always have to be diligent about your investments. However looking at the bigger picture and when you really start thinking in terms of, hey I really don't need to trade all the time or I really don't need to trade every single stock, it allows you to calm yourself down.
Especially if you are more active, especially if you're a little too aggressive or maybe you're constantly chasing those losses that you have when you're losing a trade and then you go into another trade and you lose again.
If you're constantly doing that think about this ten bagger rule, maybe it'll help calm you down, and allows you to really look at the bigger picture and understand that you really don't need to make a lot of trades to be profitable, to be successful and have a nice cushion to your funds in your account and have a healthy lifestyle.
Thanks again for joining me and remember to do what you love, contribute to others, but most importantly live life abundantly.
I’ll see you next time!