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Broke to Paid: The Peter Leeds Story

by Peter Leeds

Read all the past Blog entries here

You know what, I bet that you are not that different than I was when I got started. In fact, look at all the ways in which I was exactly as you are now.

I was desparate.  I could barely afford groceries, and didn't have many pennies to rub together.  This should prove that you can go from broke to making great returns.  After all, I was able to do it, and you will be able to as well.

I'll explain the path I took.  It really is not as complicated or difficult as many would want you to believe.

My challenge to you:  spot as many of my early mistakes as you can. You're about to see the types of errors I made at first, how to avoid them yourself, and ways to use these lessons to maximize your profits now.

Spoiler Alert:  there are at least five stupid mistakes I made when I got started. The interesting thing is that, despite these investing errors being easily avoided, most people are still making them!

When I was 14, I did a lot of jobs which were not at all fun. I pulled weeds, moved rocks, and dug holes.  The work was tough, unrewarding, and really didn't pay too well (understandably).

While most of my friends would make money so they can spend it on things, I would save every dollar I could. I knew that there must be an easier and better way to generate money, than crawling around in the dirt like I had been.

I realized that I needed to have my money make even more money for me. I had done okay in terms of savings, and now was up to nearly $4000 - perhaps that would be enough to start generating some additional income.

Popular sentiment would suggest that I invest that money into the stock market.  Thus, I started looking for an investment target for the amount I had saved, with the hopes of having it return some more money to me.

I started doing the calculation, and realized that I could only buy so many shares of a stock like IBM, or Exxonmobil. Even if the investment did well, I would probably only walk away with a 5% or 8% profit on my money after an entire year. In other words, even if I was successful it would make very little difference to my life (for good or bad).

That is when I thought more volatile, speculative, riskier shares had the potential for bigger returns. That's right, I started looking into trading penny stocks.

Keep in mind that these are the days when the Internet was new. If I wanted to trade a stock, I needed to dial up through one of those old-school modems which screeched when it connected.

Thus, like most other investors at the time, I got my stock quotes a day late, in the local newspaper.  There were only so many penny stocks listed in print, but I found one on the list!  I chose a company that looked good simply based on its name, and the price of the shares.

The company was Siberian Pacific Resources, and it traded at $0.14 per share. I was ready to invest almost 100% of my money into this company, which I knew pretty close to absolutely zero about, other than the price of the shares.

I was so young at the time (14 years old) that I wasn't even allowed to trade stocks. However, my mother had a full-service brokerage account which she let me trade through.

Thus, within a day or two, I had bought SIB. I invested almost every single penny I had saved up into that 14 cent stock.

I like to think that I wasn't as completely stupid as I probably sound from the story. After all, I decided that at the shares start dropping towards 12 cents, I would take my loss and learn a lesson from it. However, if the shares started trending higher, I would be making $300 for every penny that SIB increased.

After the first few days, the stock had dropped to $0.13 per share.  I found out the day after price decreased, when I turned to the back of the stock market listings in the newspaper.

I got a little bit nervous, and decided that I would cash out my entire position if the price of the shares dropped to 12 cents.  How's that for investment diligence?

On the second week, when I opened up the newspaper to the back section, and moved my finger down to the SIB listing, I encountered a word I had never heard before in my life. Beside the company name and ticker symbol, where the price quote should appear, all that was printed was a single word, which said "halted."

Halted?  I had no idea what that meant, although I will say that it did not give me a great feeling.

I called the stock exchange and asked them what halted means.  The gentleman explained that the company no longer wanted to have the responsibility of paying the listing fees, and abiding by the requirements of the stock exchange.  

I asked him if I could sell my shares. He said that I could, as long as I could find someone who would be willing to buy them.

In other words, look for a bigger fool, and dump your mistake onto their shoulders. Personally, I would rather go broke then do something so unethical, and besides, nobody's that stupid to buy shares in a company which is winding down its operations, right?

Nobody's that stupid. Well, except for me I guess.

I called the company headquarters for Siberian Pacific resources, and it wasn't until then that I realized that they were based in England. Speaking to the woman there, I'm pretty sure that I was phoning somebody's basement in their house.

I also asked her if I could sell my shares. She sounded very much like the gentleman at the stock exchange, when she said, "Sure, if you can find somebody to buy them."

Once the shares were halted, I was unable to sell the stock, or recover even a fraction of a single percent of the money I had invested. It is important to recognize that I didn't lose the money when the shares got halted, I lost the money the instant that I made that bad trading decision to buy a company before doing proper due diligence!

With nearly 100% of my money evaporated within a few days, I was completely washed out from the stock market. However, I did recognize that if you can lose such a significant amount of money so quickly, there must also be a way in the stock market to make that much money that quickly.

I set about doing things right. I read every book on the stock market which I could get my hands on, and learned from all the great masters about their best strategies and techniques; Warren Buffett; Peter Lynch; Peter Munk; European technical analysis strategies; much more...

I didn't follow anyone's guidance or approach exactly as they suggested. Rather, I would take pieces out of each guru or authority figure's strategy, while ignoring the other aspects which didn't seem to fit my style.

I started paper trading - I didn't have much choice, since I had no money to speak of. I imagined I had a $100,000 portfolio, in which I would keep track of the stocks that I "would have" purchased if I had any money.

I also recognized that the smaller something is, the less energy it takes to move it. With penny stocks, a single lost customer, a financial ratio which is moving in the wrong direction, a massive lawsuit, or even the entry of a new competitor in the space, the entire investment could be derailed.

In other words, it's important to look at each and every aspect of any penny stock that you are considering investing in.  I quickly found that there is a direct correlation between the amount of due diligence you apply to a stock, and the subsequent success of your investment decision.

When I started getting pretty good, the next step for myself and my team involved teaching others how to also turn a profit from penny stocks, while avoiding some of the ridiculous mistakes which I personally had just made. Whether you're talking about my international bestselling book, "Penny Stocks for Dummies,' our free tutorial articles, or the numerous videos we make to help you with your education, every one of our efforts is designed to help you avoid the pitfalls, while uncovering the penny stocks with excellent upside potential.

Speaking of our penny stock trading picks, when you are ready, and want us to do all the work for you, you can become a Peter Leeds Stock Picks subscriber here.

Act now, and you will get to see Peter's personal trades, portfolio holdings, special insights, and full analysis reports of our top weekly penny stock selections.

 

"So far this year I have completed 6 trades all in the money with a 23.5% profit margin..." [SEE MORE TESTIMONIALS]
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