Investing in high-growth stocks often feels like a balancing act—chasing big returns while managing the risks that come with it. Recently, a fascinating trend emerged when examining stock performance. Stocks that doubled in price over three months performed far better than those with the highest percentage gains during the same period. Specifically, stocks with a 100–150% rise in three months saw an average gain of 40%, while the highest gainers often dropped 25%. This insight underscores the importance of a disciplined and thoughtful approach to selecting stocks.

A High-Turnover Strategy with Big Potential

One surprising aspect of this strategy is its high turnover rate. While this might seem like a drawback, it actually improves performance. The goal here is ambitious—achieving an annual return of 100%. Historical data shows this is possible, with the 40 best-performing stocks over the past year delivering gains of up to 300%.

Of course, this level of performance comes with its challenges. The most notable is volatility. In a four-year period, for example, this strategy might yield three years with 150% gains followed by one tough year with a 75% loss. While the year-to-year swings can feel dramatic, the long-term average performance still lands at an impressive 100% per year. This approach works best for investors who are comfortable riding the highs and lows of the market.

The Game Plan: Entry and Exit Rules

This strategy isn’t about chasing every hot stock—it’s about having clear, consistent rules for when to buy and sell. Here’s how it works:

When to Buy:

1. Diversification is Key: Build a portfolio of 50 stocks, allocating 0.5% of your portfolio to each.
2. Price Check: Focus on stocks priced above $2.
3. Momentum Matters: Look for stocks that have risen 100–150% in the past three months with steady growth patterns.
4. Timing Your Move: Buy on Mondays, but only if the stock is up after the first hour of trading.

When to Sell:

1. Make Room for New Picks: Sell enough stocks each week to fund new purchases.
2. Performance-Based Decisions: Let go of stocks performing poorly within their 52-week range.
3. Cutting Losses: Sell any stocks that hit a new 52-week low.

Balancing Ambition with Realism

This strategy isn’t for everyone. The potential rewards are incredible, but the risks are just as real. The high volatility can be unsettling, and sticking to the plan during a tough year isn’t easy. But for investors who can weather the ups and downs, the long-term payoff could be worth it.

Ultimately, this approach highlights the power of disciplined investing. By focusing on momentum and sticking to clear rules, it’s possible to achieve strong growth over time. However, it’s also a reminder that no strategy is perfect, and being aware of both the strengths and the challenges is essential for long-term success.