Ketan GujarathiWhy Chasing Multibaggers Can Hurt Your Long-Term Investment Returns
The idea of finding multibagger stocks has captured the imagination of many investors, especially in a rising market. When stock prices are moving up across the board, it creates the impression that identifying winning stocks is easy and repeatable.
However, this perception often ignores a critical aspect of investing — the role of market cycles. What appears to be skill during a bull phase may simply be favourable conditions. Understanding this distinction is essential for long-term success.
“We can pick multibaggers. Subscribe to our services and get MULTIBAGGERS” – Tom, Dick & Harry
Looking at the current scenario, markets often resemble a momentum-driven environment where a large number of participants believe they can identify multibaggers. Since most stocks are rising, many recommendations appear successful, reinforcing this belief.
In such phases, luck tends to dominate outcomes. Investors who experience gains begin to assume they possess strong stock-picking ability. However, an important question remains — what happens when market conditions reverse? Will the same investors have the conviction to hold their investments through downturns? In most cases, this seems unlikely.
“Only when the tide goes out do you discover who’s been swimming naked.” –Warren Buffett
Bull markets tend to inflate confidence. Investors see their ideas working and assume their research is robust. In reality, the broader market momentum is often supporting these returns rather than underlying fundamentals.
1. The Illusion of Multibaggers in Bull Markets
The growing obsession with multibaggers reflects a behavioural bias. When stocks deliver strong returns in a short period, investors begin to chase similar outcomes without assessing sustainability.
While the idea of high returns is attractive, one must question how consistently such outcomes can be achieved. Markets rarely reward impulsive decisions over extended periods.
2. Short-Term Gains vs Long-Term Compounding
In the pursuit of multibaggers, investors often overlook the power of compounding. A one-time 100% return may seem impressive, but it is far less effective than consistent 15–20% returns compounded over several years.
Long-term wealth creation depends on discipline, patience, and the ability to stay invested — not on sporadic high returns.
3. The Reality of Identifying and Holding Multibaggers
True multibagger opportunities are rare. Even when identified, they require strong conviction and the ability to hold through volatility.
Most investors struggle with this. Instead of allocating meaningful capital to a few high-conviction ideas, they diversify excessively across multiple stocks. This results in small allocations, limiting the impact of successful investments on the overall portfolio.
4. A More Disciplined Approach to Investing
A rational investor focuses on building a portfolio of fundamentally strong companies rather than chasing uncertain high-return opportunities.
This involves:
- Conducting thorough research on business quality and management
- Understanding industry growth and competition
- Investing with a margin of safety
- Allocating meaningful capital to high-conviction ideas
- Maintaining a balanced portfolio across sectors
Such a strategy may appear less exciting in the short term but is more effective in delivering consistent returns over time. So, chasing multibagger stocks is often driven by market noise rather than a structured investment process.
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Ketan Pitrubhakta
Raymond Moses - Founder, MoneyWorks4me
Rushikesh Bhise
there is no good company or bad company, one which gives u good return is really good company & vice-versa.In bull market every stock ‘ll give u a certain return & in bear market every good company will also give u negative return. so use every opportunity & get money.