This is a question that no doubt many small investors have asked themselves. And, it’s my belief that some have accomplished it. There are a number of ways to do so, theoretically, and I previously discussed one technique I call piggybacking stock purchases. This is a continuation to that discussion. In this case, the initial investment source comes from employee stock options, and the most of the investments are in publicly-held companies I’m either working at or just left. As in the previous article, the intermediate profits are reinvested in a small number of hot stocks.

I believe you can turn $1,000 into a million in a number of ways, over a period of about 5 years. But there is one serious stipulation: you have to have a sharp mind and be fully aware of the market. It’s not as easy as you think. There is more than one way to do it, and I’m just illustrating one possibility. And at the risk of you thinking me incapable of staying at a job for long, I’m leaving out all the politics behind my job-hopping decisions to focus on the investing aspects.

Back in 1994, I got a job in a small software company. I was the 22nd employee. When I left in 1996, there were over 200 employees. Now, there are many more, after many mergers and acquisitions. The company went IPO in early 1996, and all existing employees received a generous share-options plan. Had I stayed on, the next five years would have given me options that would have been worth between $300-450K in stock value. And they would have been relatively in expensive to purchase.

I didn’t stay, for reasons I won’t get into. But I was eligible for a few matured options and, had I read the fine print carefully, I could have purchased my existing matured share options for well under $1000 within 60 days. In fact, I had good enough credit at the time that I could have purchased them on margin, but we’re talking less than a $1000. Buying out my available options and selling them would have fetched me about $44K at the time. Not a bad return for a tiny investment. Did I ever screw up.

I was out of work for about 4 months after that, and resorted to selling my prized vinyl music collection, amongst other things, to pay my bills. When I finally found work, it was at company B, who were also growing, and doing many, many mergers and acquisitions. The stock had just split before I started working there, and split again shortly after I left. I only stayed a year, again due to politics, which I’m really bad at handling.

Now at that point I had no money to invest, but had I managed to purchase my options from company A, I could have turned the otherwise fictional $44K into about 2750 shares of company B. The shares at company B were around $16 when I started, and turned into $22 shortly after. So I would have had about $60K. I’m not even factoring in the employee discount because I don’t remember what it was. Maybe 10-15%.

I left a year afterwards, a restless spirit who despised politics, and went to a large computer/ internet consulting firm. It was a private entity owned by a public telecom company, and they went IPO the calendar year after I started. Again, I don’t remember the employee discount for shares, and there was no share options that I recall, but they did have bonuses.

I only stayed at company C for a year and a half because the politics were even more intense. But I managed to get one bonus of $5000, or was going to get it. I wanted to invest in a tech stock that was running around $75 per share, but I didn’t have enough for a full 100-share lot. So instead, I sunk that $5K into a mining penny stock and lost all of it.

How? I got a taste of profit by the end of the first day, and bought more on margin because I knew I was going to be getting that $5000 bonus. The stock sunk before the end of the week, and I was forced to sell because of the terms of margin accounts. All of my bonus was gone before it had even been paid out to me. I had called up one of the investor relations people on the phone and I swear to you he laughed at me. I suspected that there was something fishy about the company, but I didn’t have the time to pursue the matter further.

Short lessons: (1) Don’t be greedy. (2) Run away from penny stocks, especially in mining. (3) Never buy on margin unless you can afford to lose a relatively large portion of your investment. This is less likely to happen in a bull market, but it does happen. Especially with mining stocks.

Still, had I had that fictional $60K and the real $5K bonus, and had I invested in Company B a second time, after it split again, or even in company C, I could have turned that $65K into about $100,000 or more. At $100,000, I would have put half of the money into a gold-silver switch, which I’ll be explaining in a near-future post, hopefully later in the week.

Of course, none of this stuff actually happened, except for my losing the $5K, plus a bit. After that, I became a contractor, because I couldn’t stand politics, and have not had the good (or bad) fortune to work for a pre-IPO or an M&A (Mergers and Acquisitions) type of company since. However, I had been tracking Intel (NYSE: INTC) and also the market in general. I also correctly predicted 3 of 4 market turns in 2000. I had been tracking about 40 stocks between 1996-2000, and could have subsequently turned that $100,000 into about $750K in trading, mutual funds, and gold-silver switching. (Not long-term investment though, as Intel has sunk to about half its value then).

That’s not a million, but I came close in theory. Of course, theory is just that, and had I actually made the trades I’d wanted to, I may not have made all that money. Still, I like to think that I might have made close to a million with just an initial investment of under $1000.

Even if you do not work at a pre-IPO (or recently post-IPO) company, this technique can still work for you. Maybe you have friends or otherwise know people who work for such companies. Or you live in or near a city that is home to such a company. Don’t ignore local news, as that could be a rich source of unexpected investment information.

The stock market is speculation, and I like to believe that keen analysis could turn a small investment into a sweet million. It’s still one of my goals to prove that, and when that happens, I’ll document the process here.