As this is my first year in finance and investing , I just thought I'd post a discussion on here regarding something I know little about.
The math behind a multi bagger...
Now I've heard people discuss a twenty bagger say (£1000 x 20 or 2000% ish) = 20 grand. However Ive also seen the argument of £1,000 x 10 bags = £10,000 + another 10 bags = 100k?
Id be interested in your opinions?
In my opinion, a 'bag' is simply your sale price divided by your original outlay which gives you the number of bags.
Ignoring costs, buy 1000 £1 shares (£1,000) and sell them for £2 each (£2,000), you have two-bagged. However, instead of selling them, assume when the price had increased two-fold, you bought a further 500 shares (a further £1,000 outlay). The price rises to £4 per share and you decide to sell the lot. You have 1500 shares which you sell - 1500 x £4 = £6,000.
You have sold £2,000 of original outlay for £6,000 - a three-bagger. Or if you really wanted to split the transactions down, you have four-bagged your first £1,000 and two-bagged your second £1,000.
James
