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I have identified a stock after doing some research and planning to follow the below investment plan for my investments in the stock:

  • Buy a stock at $10 per share with the $1000 I have - I am hoping the stocks would reach $100 in the next 2-3 Years

  • Wait to see the performance and when it is up by 5-10% - invest another $1000.

  • Continue this until I reach my target of $100 (and maybe continue doing this afterwards)

It is based on the following assumptions\hope\factors

  • The stock keeps on giving good returns
  • I do not have the capacity to invest a lump sum amount initially
  • I also wouldn't want to risk putting all the money at once

Note: I would have a stop loss plan at every step of investment

Is this something normal to do? Can you suggest any better alternative? I am just planning to enter the stock market and any guidance would be really helpful!

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    It is a little concerning that you are investing in a stock on the basis that you hope it will reach 10x its current value in the 'near future'. That is explosive levels of growth; be careful that you are investing, and not gambling. Know the risks of what you are doing, before you do it.
    – Grade 'Eh' Bacon
    Apr 26, 2017 at 13:50
  • Why would you wait until the stock is up before buying more? If you think it's going to go up just buy all you can now.
    – D Stanley
    Apr 26, 2017 at 13:51
  • @Grade'Eh'Bacon To make it clearer - I am looking at 2-3 years. Not sure if that would count as 'near' future. I have updated my question accordingly
    – Chillax
    Apr 26, 2017 at 13:54
  • @DStanley I hope the stock will go up - But I would want to be sure
    – Chillax
    Apr 26, 2017 at 13:55
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    @Chillax The average growth in the stock market annually is ~7%. You are asking for annual growth of (1000% / 3 years = ) 333%. That is about 50x the average growth rate. If that growth rate is achievable, then in 5 years you could turn $1,000 into 1.5M. You should consider how extreme that level of growth is; looking for returns like that may lead you down into desperate 'investment' moves that are more like gambling.
    – Grade 'Eh' Bacon
    Apr 26, 2017 at 14:00

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I would encourage you to read The Warren Buffett Way. Its a short read and available from most libraries as an audio book. It should address most of the ignorance that your post displays.

Short term prices, offered in the market, do not necessarily reflect the future value of a company. In the short term the market is a popularity contest, in the long run prices increases based on the performance of the company. How much free cash flow (and related metrics) does the company generate. You seem way overly concerned with short term price fluctuations and as such you are more speculating.

Expecting a 10 bagger in 2-3 years is unrealistic. Has it happened, sure, but it is a rare thing. Most would be happy to have a 2 bagger in that time frame.

If I was in your shoes I'd buy the stock, and watch it. Provided management meet my expectations and made good business decisions I would hold it and add to my position as I was able and the market was willing to sell me the company at a good price.

It is good to look at index funds as a diversification.

Assuming everything goes perfectly, in 2-3 years, you would have an extra 1K dollars. Big deal. How much money could you earn during that time period? Simply by working at a fairly humble job you should be able to earn between 60K and 90K during that time. If you stuck 10% of that income into a savings account you would be far better off (6K to 9K) then if this stock actually does double. Hopefully that gets you thinking.

Staring out is about earning and saving/investing. Start building funds that can compound. Very early on, the rate of return (provided it is not negative) is very unimportant. The key is to get money to compound!

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    I absolutely agree that OP is speculating more than investing and it is a fine line. He also only had plans for when the company's performance is up, maybe should consider what to do if things turn the other way. Anyway, +1 for the advice in the last 2 paras
    – MH.Q
    Apr 26, 2017 at 14:48
  • Thanks a lot for the valuable inputs. I think all the suggestions were more towards my immaturity in expecting the returns and less towards my strategy. I had identified a couple of stocks which had given this type of returns when you check now (did not invest) I did not want to miss the bus again this time. My dad had invested $30 Dollars in a stock (15 years back) which is worth 81000 USD now (this is huge money in my part of the world) -my inspiration. Now if he had kept on accumulating the shares? And the stock I am talking about has risen almost 12% just today.But thanks for all the help
    – Chillax
    Apr 28, 2017 at 8:54

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