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The Basics that'll make you big money on the stock market

by , 20 June 2014

I get scores of emails from people telling me how badly they want to make lots of money investing. But the problem is, many of these people confess that they're literally just getting started.

That's why today I'm starting at the beginning - and I'll show you how to make money in the markets from square one.

You need to understand investing from square one

The words "stocks" and "shares" can be used interchangeably. Stocks are a portion of a company. They give you ownership and profit sharing rights in the company you invest in.

When you buy a share of stock, you are literally buying a share in the equity of that company.

Companies raise money by selling ownership interests to investors and the public. Equity is the business term for an ownership interest. Ownership interests take the form of shares of stock in the company. That's why the words "stocks" and "shares" and "equities" are all
interchangeable. And it’s because the money shareholders put in helps the company stay afloat that it owes shareholders future profits.

But here’s the important bit to remember :

Buying stocks is the same as buying any other business. Would you invest your own money into a franchise outlet with no profit expectations for the next two years?


The same goes for stocks. You need to look at the company represented by these stocks and through measures I’m about to share with you determine the merits of the investment.

Yes, share prices can move upwards in the short term for bad investments too… But you’re a long term investor. You want to make big money in the long run. Money that can change your financial future.

So you want to look for companies that’ll do well in the long run.

Even Warren Buffett echoes this sentiment when he says: “The goal of the nonprofessional investor should not be to pick winners but should rather be to own a cross section of businesses that in aggregate are bound to do well.”

Now you need to find the shares that’ll perform in the long run

So, where do you look for businesses that’ll do well in the future?

My choice is in the small cap index. Now while many will tell you these small shares are more risky, my take on them is that the risk is too big not to invest in them.

They’ve outperformed the general market over the last 10, 20 and 50 years. They are the companies of tomorrow. The small little businesses that sold shares to investors and listed because they saw a big opportunity to grow, and to continue growing well into the future…

Shares like a small technology firm, Poynting, which I first invested in two years ago. Then the share was worth a mere 17c.

Since then the company’s developed very innovative cellular base station that could take over the market, it’s also done an acquisition adding another profitable communications company to its stable.

And it’s share price?

Well, that’s hit 330c. Investors who got in at 17c with a R10,000 investment are now sitting on R194,117…

How you can find these kinds of BIG GAIN shares

I call it my PowA! strategy.

What it comes down to is, I look for the four characteristics a company needs to succeed in the big business world.

If the company makes it big – its share price follows and you can make many times your capital investment as it does…

Sure, my strategy doesn’t pick winners every time… But as the Buffett quote goes, it picks business that in aggregate are bound to do

The best way to find the small shares with the very best potential

I find the very best small cap shares for my Red Hot Penny Shares subscribers each month, which is how the group of investors following my strategy have banked gains like 205%, 221% and 85% this year already!

To find these great opportunities I use my PowA! Strategy, if you want to do the same, here it is:

Profits! – When I evaluate companies, it’s more than just understanding what they do and how they do it. I want to be sure they’re making money or at least have the prospects of making big money in the near future. Not just showing paper profits. Profits are possibly the most important part of my strategy, but they can also be misleading if you don’t combine them with the rest of my criteria.

Open Communication! – It’s all about finding the Truth. I’ve seen so many great penny shares stumble because the truth is hidden. That’s why I look deep into all aspects of the company to expose any lies there might be.

Wow Factor! – I only tip shares that stun me. There’s always a reason a share’s price shoots through the roof. I need to know why it’ll make more money tomorrow than it’s making today.
We all know how earnings growth affects share price movement.

Assets! – A company that doesn’t have the money to back its ambitions doesn’t mean much to me. That’s why I look for companies with strength in the balance sheets. I also like companies that use small amounts of assets to produce huge profits!

So, whenever I review a company I check that it meets all of these criteria. If it does, it earns a spot in my portfolio.

If it doesn’t, I keep it on my watch list – monitoring it continuously should the company’s situation change.

Applying my PowA! strategy will help you find stocks that have low risk and lots of upside. This strategy has worked for me for more than five years and could lead you to a bountiful fortune.

If you’d like to see the small cap stocks I target every month I suggest you have a look at this.

Here’s to unleashing real value

Francois Joubert

Chief Investment Strategist, Red Hot Penny Shares

The Basics that'll make you big money on the stock market
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