View The Video: Why Millionaires Get Rich Following the Penny Stock Value Investing Rule
Let’s talk real dollars. Let’s assume you make America’s median income for a single person of $40,000 per year. Not counting inflation and interest rates, how many years would you need to work to earn 1 million dollars. Let’s say you started working in 1982, and you were so frugal you saved $20,000 each year. You shared a house with several roommates, never had children, only went out for fast food once per month and lived off bulk cans of soup. Forty year later, in 2022 you would still have only $800,000 in your bank account.
Forty years of hard work, and no money for fun, or to support a family, would still leave you short of landing on the millionaire’s list. At this rate to make the millionaire’s list you would need to work and save $20,000 each year for 50-years. Yes, fifty-years, that’s a long time living like Dickins’ Ebenezer Scrooge. Even if you work for 60-years saving $20,000 per year, you would still be considered poor versus a business mogul like Jeff Bezos, Elon Musk or Bill Gates.
This example shows that you will have a difficult time building wealth if you don’t follow the millionaire’s investing rules of money. I have already made several videos on investing to build wealth in a playlist I’ll share at the end of this video which you can go back and check out. But you might be asking do you need to start a successful tech company to become at least a millionaire in 20-years or even a multi-millionaire? The answer is no.
Take the example of Warren Buffet. He didn’t start an Amazon or Telsa. All he did was to find the right stocks to invest in. Even better, some of his biggest winners started out as penny stocks. But many investors fail when investing in the stock market or cryptocurrencies. You may be asking what differentiates most investors from the rest. What is value investing in penny stocks? Now you are asking, why do the majority of millionaire investors follow this rule? But before we answer that question, make sure and give this video a thumbs-up and subscribe for more videos like this one. Also remember this video is not financial advice but for education and entertainment only.
This is Lynn, and welcome back. Remember that penny stocks are very risky: high risk versus potential high reward. Now let’s dive back into the millionaire investing.
In 2003 Apple was a tiny company. Back then the iPhone didn’t exist, and Apple was not the behemoth success they are today. Apple’s founders barely scraped by, and Apple almost went bankrupt several times over the previous 20-years.
But, Charlie Munger, recognizing a winner, tried to talk Buffett into buying Apple in the early 2000s. But Warren Buffett didn’t yet understand how tech companies worked, and couldn’t put a value on Apple. Charlie Munger finally convinced Buffett that Apple was such a powerful brand, that they could sell their products for a much higher profit than their competitors. Buffett then bought Apple in 2016 when the stock was 24 dollars per share. Then he bought over one billion shares of Apple over the next two years. In March 2021, this investment was worth more than $100 billion dollars to Buffett’s fund, Berkshire Hathaway.
Instead of just buying randomly hyped stocks, Buffett also found success with many consumer staple stocks like Coca-Cola, by digging into the company’s financials and business plan. Then Buffett would bet on the long-run and the stock is up 2000% since he started buying Coke 33-years ago. Today, Buffett’s Berkshire Hathaway owns about 10% of Coca-Cola, worth approximately $22 billion dollars for his original investment. That’s exactly what value investing is!
If you look at companies that Warren Buffett or Peter Lynch have invested in, you’d see the same incredible result. Buffett seeks companies that have such a great value that he can buy their stocks, and then forget about them for the next 10 or 20-years. Value investing is buying stocks that are today, undervalued on the stock market!
Now back to former penny stocks like Apple, Nvidia and the former Facebook, now META. In 2003, these all were all selling for less than 1 dollar per share. A $10,000 investment in Apple in 2003 would now be worth 1.6 million dollars. But, a 10,000-dollar investment in chipmaker Nvidia at 43 cents per share would today be worth 2.5 million dollars. And, best of all, a 10,000-dollar investment in the social media giant, Facebook at .93 cents per share would today be worth 5.2 million dollars. Investors who buy these penny stock with a conviction about their value, don’t sell!
The fact that Warren Buffett built a one-hundred-billion-dollar fortune, is a clear testament to the power of value investing. Warren Buffett did finally start investing in technology stocks and made billions! Simple by picking the best penny stocks, you have the opportunity to become a multimillionaire in ten or twenty years!
Most average investors buy a popular stock that is hyped through social media, without understanding the company’s financials, business focus or plan. Investors can own a dozen or even fifty individual stocks in their portfolios, but if you ask them about these companies, they don’t know much when it comes to the details. There are a lot of passionate Tesla and Bitcoin investors, today. These investors are convinced that Tesla for example will reach $5000 per share in 2030, but if you ask them to share about why: about Tesla’s business plan and value fundamentals, they hardly know anything. Especially now this is important to know how Telsa plans to beat the coming competition like Apple with their upcoming Apple car!
But I do admire Elon Musk for his huge business success and particularly with SpaceX.
Many investors also blindly put their belief in Cathie Woods, only because her top ARKK ETF gained had gained 189 percent by December 2020. Only to lose investors 13 percent in 2021, versus the average S&P market gains of 24 percent.
Let’s say you were gifted a Liberty 1908 Five Dollar Gold Coin by your great grandfather at birth. Would you sell this gold coin then for five dollars or save it to today’s value of $446. You’d save it of course! Value investing is not about investing in what is hyped or trending. If the stock is a big winner today, you’ve likely already missed on its biggest runup in value. If you know a stock’s true value you can make a lot of money when you buy it for a lower cost on sale! Stocks like our gold coin go through periods of interest or high versus lower success and price fluctuation.
If a penny stock is really worth $1.50 per share and you buy it for 50 cents, you will make $1 per share on your investment simply by waiting for the stock to raise back to its true value. Your investment of $10,000 would then be worth 30,000 dollars! That would be a $20,000 profit. Often, by the time the stock has reached the $1.50 price per share, two-years later for example, the company is worth even more. The provides you with the chance, like Apple, to make even more money!
If you had purchased a stock at a price of $1.50 and it raises to a price of $1.75 another two years after that, then your $10,000 would have made you a profit of only $2,500.
Remember that there are fundamentals you need to look at when buying a stock like the income statement, balance and cash sheets. Plus review more details like reading their annual report and how the company stacks up versus the competition. These details are all covered in my playlist on “Making Millions with Penny Stocks.” But value investors look beyond even these details to find impressive leader like Steve Jobs who headed up Apple for decades.
Investors also look at the company’s history of creating value for shareholders through moves like buying back shares. Versus diluting stock ownership by flooding the market with million or billions of additional shares. Investors also look at the company’s dedication to their employees, and principles. IF you can’t do all of this, then you would probably do much better investing in an S&P 500 ETF like VOO or SPY returning an average of 9% per year.
Warren Buffet also has made the statement that the vast majority of investors would do much better investing in an S&P 500 index fund. And, what’s even better these funds have returned a whopping 15% to investors during the past 15-years bull market run.
But remember that those investors who are willing to put in the extra effort, and find those rare penny stock gems like Apple, Nvidia and Meta can make millions! If you want to learn more about value investing in penny stocks then you will enjoy this custom playlist, “Making Millions with Penny Stocks.” that I have made for you, that could potentially change your life! Now give this video a thumbs up and subscribe to our newsletter so that you are notified about new videos coming out like this one.