There is never a dull day in the life of an Afterpay Touch Group Ltd (ASX: APT) investor.
With Gross Merchandise Volume growing at over 200% and a share price that is up 400% in less than two years, Afterpay is one of the ASX’s premier growth stocks (Honourable mention to A2 Milk Company Ltd (ASX: A2M), WiseTech Global Ltd (ASX: WTC) and Xero Limited (ASX: XRO)).
Whilst the company is still in the early stages of its journey, there is a lot that investors can learn from this company.
Here are 5 lessons that I think growth investors can learn from the Afterpay experience:
- Volatility is real. You’ve heard it many times, but can you really stomach owning a company that can easily gain or lose 30% of its value in a single day? Stocks, in general, are volatile, but unprofitable high-flying growth stocks like Afterpay are really volatile.
- Don’t be obsessed with one company, diversify. If you believe in Afterpay’s future, by all means, buy its shares and get some exposure. If you don’t, then don’t buy or even short it. However, do not be obsessed with one company, there so many other opportunities out there. Overexposure to one company, never mind one as volatile as Afterpay, can make you lose a lot of sleep.
- Know your game. Don’t be a trader. It’s quite possible that some professional traders sold Afterpay shares when the price was high and bought again at a lower price during the flash crash over the last few days. That’s very difficult for retail investors to replicate and get the timing right consistently.
- #HODL. Hold on for dear life. If you do invest in a growth stock early on in its growth phase, hold. The best growth shares go higher and higher over time and can be a real boost for your portfolio.
- Think independently. Will regulation slow down Afterpay? Does this company have a moat? Can it take off in the US and UK? Different people have different views on these issues which could have a profound impact on the company’s future. Do your research and think independently.
Discover why this legendary Australian stock-picker just issued a “Double Down” buy alert to his exclusive group of insiders… and why he’s convinced this might be the single most attractive entry point for years to come.
You can find Kevin on Twitter @KevinGandiya.
The Motley Fool Australia owns shares of A2 Milk, AFTERPAY T FPO, WiseTech Global, and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.