September 23, 2017 02:26 pm CDT
"Illegal Stocks" Returning 10,000%?
By Alex Koyfman, Wealth Daily


Let me present you with a little scenario to illustrate a point that's lost on just about all of the 99%...

Martin, a young man in his early 30s, learns about an investment opportunity from a friend of his.

A few phone calls are made to the right people, and Martin receives something called an "investor subscription packet" in his email inbox.

He fills out the paperwork — it takes about five minutes total — and emails it back to the original sender.

The next morning, Martin goes to the bank and wires $25,000 to a corporate account in New York.

In return for this wire, he gets a single piece of paper in the mail: a stock certificate for 10,000 shares of a privately held technology company.

At that point, Martin sits back and forgets about the investment.

He goes to work, goes on trips, spends time with his friends and family... goes about his regular life for about 10 months.

And then one day, he receives a phone call. It's the friend who originally turned Martin on to that investment.

The company had just announced a merger agreement with a massive, publicly traded tech company.

According to the agreement, shareholders of the private company would receive one share of the acquiring company for every share of the acquisition target.

Martin checks the tickers... The company making the acquisition is now trading for $200/share.

His investment is now worth $2 million.

He calmly hangs up the phone and goes back to drinking his coffee.

Don't Get Excited... You're Not Martin in More Ways Than One

Why isn't he bouncing off the walls with joy? Simple: Because Martin was already rich to begin with.

His $25,000 investment is a small, measured chunk of his net worth — which was already in the millions.

To those of who think this is a fantasy or a once-in-a-lifetime lottery ticket-caliber win, you couldn't be further off.

Private equity investors live this kind of scenario every day. In fact, this one is somewhat underwhelming compared to what could have been.

Investors who took part in early financings of some of today's brand-name, world-famous tech companies like Facebook (NASDAQ: FB), Tesla (NASDAQ: TSLA), Twitter (NYSE: TWTR), and Google (NASDAQ: GOOG) and high-profile acquisition targets such as Instagram, Whatsapp, Beats, and Oculus made thousands of dollars, or hundreds of thousands of percent, on every dollar invested.

And the only real requirement to gain access to this caliber investment is to be like Martin: already rich.

The reason behind this is a law — an obscure section of the SEC Act of 1933 — that was passed during the height of the Great Depression to prevent middle class or "unsophisticated" investors from ever taking part in risky business ventures.

To the Federal Government, Your Net Worth is Everything

The problem is, the only qualifier for sophistication is a high net worth or high annual earning potential.

So when you boil it all down, what this law says is that only the rich can get much, much richer.

And if you're not rich, you'll need to be happy investing only in companies already traded on the public markets.

So if you're in the 99% and you want to make investments, you only get a shot at them after the one-percenters have already owned and most likely sold their shares.

It's exactly that dynamic that allowed Mark Zuckerberg to cash out a cool billion the day Facebook went public, while millions of retail investors ended up losing half their share value as the stock tanked in the weeks following the IPO back in 2012.

The chart below, in fact, shows exactly what happened on the fourth day of trading. Guess which side of the equation people like Martin were on?

fbchart

Pretty interesting how that works out, isn't it? A law designed to help the middle class works exactly against their best interests.

Well, if you ask me, it's an outrage... a glass ceiling that keeps a vast majority of Americans planted firmly where they are, unable to crawl out of their financial ruts through smart investing.

On the flip side, to those who are already rich, retiring young like Martin and letting your money work for you isn't just possible — it's the way most of them do it.

Now, I know you might have the impulse to go burn down a mansion or throw a rock at a passing Porsche right now, but I wouldn't do that.

It's not the one percent who created this inequality. They're just taking advantage of it — as anyone would.

No, it was the federal government who once again — in the interest of doing what's "in everyone's best interests" — created one of the most significant blocks to upward mobility in history.

And in the U.S., of all places — a nation that prides itself on presenting unlimited opportunity to anyone willing to take a chance and work at it.

Not surprisingly, since the '30s, almost every modern economy has adopted its own version of this law, and to the same effect.

Which is why wealth inequality everywhere in the developed world is where it is today.

Where There's a Will...

However, there is now a light at the end of the tunnel.

You can't get around the federal laws, but you can find a way around the limitation itself.

You see, there are companies with the upside potential I described in Martin's scenario that are available for you to invest in.

The reason is this: They're already public.

But as venture-stage companies, they also have the sort of long-term potential you would have gotten from early-stage investments in some of today's globally recognized tech giants.

Want to turn a modest $300 investment into $30,000? It's possible.

The only key is knowing how to find these companies.

Several years back, a dispatch surfaced detailing a method for targeting exactly this breed of investment.

And here's the part of special interest to you: This dispatch didn't profile a bunch of wealthy investors who got wealthier...

The stories in it were of everyday people, including one man who had been homeless at one point.

The one thing they had in common was that they were all able to close million-dollar gains by following several basic yet indisputably effective steps to properly select the companies to invest in.

Needless to say, it caused a major tremor for professional money managers, as this method finally put the power of serious earning potential into the hands of everyday people.

I recently finished an in-depth study of both this dispatch and the methodology of the people whose stories it profiled.

What you'll see might be shocking, but in today's financial environment, it also might be the best piece of news you've read in a while.

Get instant access to my report, and learn all about what a handful of former members of the 99% found out on their own.

Click here.

Fortune favors the bold,

alex koyfman Signature

Alex Koyfman

Coming to us from an already impressive career as an independent trader and private investor, Alex's specialty is in the often misunderstood but highly profitable development-stage microcap sector. Focusing on young, aggressive, innovative biotech and technology firms from the U.S. and Canada, Alex has built a track record most Wall Street hedge funders would envy. Alex contributes his thoughts and insights regularly to Wealth Daily. To learn more about Alex, click here.

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