Many of the key principles of successful investing have been learnt the hard way and often multiple times over. Often these principles can be succinctly turned into rules of thumb…
Let your winners run
If ever there was a principle worth heeding it would have to be to stick with a quality company you own that has a big growth opportunity ahead of it. Selling a winner too early can mean missing out on huge gains.
This “rule” is worth remembering, however, another so called “rule” – that you can’t lose money by taking a profit – is fraught with danger. That’s something investors in this week’s initial public offering (IPO) of commercial jetpack company MARTIN AIR FPO NZ (ASX: MJP) will want to keep in mind after applications were scaled back and the stock closed up 10% at 44 cents at the end of the first day of trade.
While for some, the concept of humans zooming around the sky with a jetpack strapped to their back may sound fanciful, it appears it could be close to reality for Martin Aircraft which now boasts a market capitalisation of $105 million.
Of course, investing in early stage ventures is not without substantial risks. For every Sirtex Medical Limited (ASX: SRX) which has provided investors with gains of 1,400% over the past decade there are literally hundreds of other ventures that fall by the wayside. This means it is critical for investors to not only undertake in-depth research so they understand the potential risks from investing in a speculative company, but it also means investors should actively consider the most appropriate way to diversify their portfolio.