Evolution of Investment Strategy: Up to 20 Million Yen in Capital

Up until I reached 10 million yen, I fought almost exclusively using technical analysis, but as my operating capital increased, I began to pay attention to fundamentals little by little.

The trigger for this was the increase in my number of 'pickled' (long-term underwater) stocks.

Many of the stocks I favored in my early days of investing were small-cap growth stocks, and many of them were loss-making companies.
Since I was choosing them based solely on charts and price movements, they would become targets for monitoring if there was any activity, even if their financial situation was in tatters, and I would buy them if the conditions were met.

Stock prices have flows such as growth periods, stagnation periods, and decline periods, but small-cap growth stocks often 'rise all at once and fall all at once'.

Because the price movements are volatile, it was common for me to find that 'where I bought was the peak'.

With stocks that have such intense volatility, you will get badly burned if you cannot cut your losses, but at that time, I found it difficult to sell.

In this way, my underwater stocks piled up so much that I felt like a pickle shop owner.

Thinking that I really couldn't go on like this, I read several books on fundamentals and became able to understand financial statements such as earnings reports, balance sheets, and income statements, albeit little by little.

Unlike when I studied chart analysis, studying fundamentals was painful.
It just felt difficult, plain and simple.
Charts come in visually, but in my experience, fundamentals are difficult to get into because the technical terminology is so complex.

For fundamentals, I mainly focused on 'net sales,' 'ordinary profit,' and 'net income,' and decided to first pay attention to the growth rate of sales.
It is a simple way of thinking: if sales go up, profits will go up, and the stock price will eventually go up as well.

As I continued to invest from there, I noticed that the higher the 'profit growth rate,' the more the stock price would jump.

Since stock prices basically 'rise along with improvements in business performance,' it is important to pay attention to the rate of change.

And then,

['Companies where ordinary profit grows by 5% or more every year, 20% or more in the last 1-2 years, and sales grow by 10% or more']

I set specific standards like this for myself and conducted stock selection.

From around this period, I feel like the combination of technicals and fundamentals meant I started getting badly burned less often.

Also, apart from researching individual stocks, I was studying the 'Nikkei Average,' 'futures,' 'movements in the dollar-yen,' 'relationships with oil and gold prices,' 'relationships with bonds,' and 'the influence of foreign markets, led by the United States'.

This was more experience than study.
The market is a place where various economic events occur, so if you survive, you will naturally come to understand them.

When it reached 20 million yen, it became a large amount of capital, so I was investing cautiously.
Compared to when I had 10 million yen, the act of 'buying stocks on a whim' decreased drastically.
I suppose you could say I grew up in a good way, or perhaps I lost my recklessness...

Well, I can't keep dabbling in 'one-shot reversal gambling biotech stocks' forever (^^)

Thank you for reading until the end.

■ Related (if you wish to continue reading)
・Evolution of Investment Methods: The Period Up to 10 Million Yen in Capital — Early failures are a treasure

・Evolution of Investment Methods: Up to 30 Million Yen in Capital — The necessary trimming for the next stage