The High Risk, High Gain Strategy

Momemtum stocks are the ones that are currently in favour by investors. Karan Bhojwani and Nikita Singh explain how one can identify momentum stocks even as DSIJ team identifies top momentum stocks to invest in at this juncture.

Mihir Das is a 36-year-old marketing professional from Mumbai. After having worked for over 10 years in the marketing domain, he had invested a decent corpus of his savings in fixed deposits (FDs) of his bank. Now his FDs were about to mature and at maturity he was going to get a decent lump sum amount. He wished to invest the amount in the stock market. However, he faced a major challenge when looking for a stock to buy as there are more than 2,000 stocks listed on the Indian stock exchanges. Even when an investor/trader focuses on a small universe of stocks, such as the 500 in All Ordinaries, there is still a larger array of choices than most investors can deal with and this is an issue not quite restricted only to Mihir Das, but many other investors/traders face similar dilemma when they think about investing or trading. There are a large number of trains at the platform to reach the destination, yet which is the correct one to board is the big question mark!

Given the large number of alternatives, it is not surprising that investors tend to concentrate on stocks that are every now and then featured on television or in the financial press. As most people do not have an objective process for choosing stocks, more often than not, they purchase stocks going by the news stories and other random recommendations and endorsements by friends, relatives and colleagues.

However, following these random recommendations and endorsements usually result in erosion of your wealth. If you want to be successful in the stock market, you need to select stocks using an investing style. This is a distinctive way of picking stocks that gives you objective rules for selecting which stocks to buy and which ones to sell.