How to Become A Millionaire Buying Penny Stocks
Ever since I was a kid, I wanted to learn how to become a millionaire. (Actually, I wanted Howard Hughes to adopt me.)
But as the years rolled along and I became an investor, I stumbled across the concept of buying 'Penny Stocks'.
A lot has been written on this, but I wanted to see if I couldn't explain the opportunity and how to do it from a total beginner's perspective.
Difficulty: Challenging
Instructions
Things You'll Need:
· Money you can afford to lose.
· Internet connection.
1. Step 1
First, let's define what a Penny Stock is.
In layman's terms, this is a common stock that trades for less that $5 per share and typically is traded on the 'over the counter' (OTC) or outside of the major stock exchanges such as the NYSE or NASDAQ.
[According to the U.S. Securities and Exchange Commission: a penny stock is a low-priced, speculative security of a very small company, regardless of market capitalization or whether it trades on a securitized exchange (like NYSE or NASDAQ) or an "over the counter" listing service, such as the OTCBB or Pink Sheets. The terms penny stock, microcap stock, small caps, and nano caps are sometimes all used interchangeably, however per the SEC definition, penny stock status is determined by share price, not market capitalization or listing service.]
2. Step 2
This is where a great number of fledgling companies get their start: as 'penny stock' companies.
Here's how it happens: to raise capital to get their business off the ground, a new company will offer common shares of stock in their business. Because the are unknown and most new companies fail, their initial offering can literally be valued at well under one penny per share.
In fact, I currently own two stocks that last traded at $0.0001 per share! That is the equivalent of 1 MILLION shares for $100!
SO, THIS IS HOW TO BECOME A MILLIONAIRE BUYING PENNY STOCKS:
Let's say you own 1 MILLION shares of stock at $0.0001. Then, the company really takes off and their stock increases to $1 per share. What just happened?
Then, your 1 MILLION shares would now be worth $1 MILLION DOLLARS!
3. Step 3
OK, let's say I have you hooked. So let's get started buying penny stocks!
Besides some money to invest, you're going to need either a stock broker or an online trading account. I use Etrade.com, but there are many others like Scottrade, Charles Schwab, etc.
These online traders will require a minimum deposit and will charge you a small commission when you trade stocks (either buying or selling).
In the RESOURCE section below, I have included links to a couple of these online trading companies for your review.
4. Step 4
Once your account is set up and you've deposited some money (you can transfer funds directly online to get started right away), you next need to decide what stocks you want to buy.
All you need to do to find ideas on stocks to buy is to Google the terms "penny stocks" or "hot penny stocks" and you'll find dozens of sites providing tips. Here's a link that I just checked out recently:
http://www.thehotpennystocks.com/
5. Step 5
Once you've picked a stock to buy, you're all set.
The online trading system will ask you for the stock name or symbol. Then, you need to decide how many shares you wish to buy, etc. Basically, they lead you right through it.
Those are the basics!
Personally I didn't read any books beforehand, I just waded in and learned as I went. I didn't even have the weak advice that I'm providing you with!
If you would like to learn more, here's a link to a FREE online book by penny stock guru Peter Leeds titled "Understanding Penny Stocks: http://www.pennystocks.org/
6. Step 6
Why would you gamble at buying penny stocks?? (and that's exactly what you're doing)
Well, first of all, it's fun to buy these and watch what they do. Second, there's always the chance that you'll pick one that could turn into the next Microsoft.
But, I caution you on a couple things:
1) This is like Vegas or Atlantic City, unless you can afford to lose the money, don't play the game.
2) This can be addicting! Like I said, it's basically gambling. And, it's kind of cool to say "I own 1 Million shares of XYZ Company!"
Good luck!
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