How to turn $10k into $1 million

I ask for 'stupid questions' in the Marcus Today newsletter, and I get them.

Here's one: "I have $10,000 and want to turn it into $1 million. How do I do it?"

You're thinking, 'How stupid', but it's a really good question. So, let's try to answer it.

Be willing to lose

The first thing to do is to accept that you will not achieve this goal without being prepared to lose all your money.

You will not achieve it in the bank, in cash, in property or in managed funds.

There is no 'average' return in any asset class that will suit you. You need to win the lottery or win some long-odds bet at the bookies.

Outside of that, you have one obvious option: build a business.

I have handled a lot of wealthy people in my time and, outside of inheritance, building a business, owning a business and selling a business is at the top of the list of realistic options for turning $10,000 into $1 million.

Making $1 million in business over many years would be, quite honestly, ordinary.

But who wants to do that when you could sit at home on a PC and trade shares without all the risk and effort of building a business?

Remember why the stockmarket is there

And so it is that a lot of people come to the stockmarket with stars in their eyes, hopeful that without qualification or effort their fortune awaits.

But it doesn't.

After 43 years as a stockbroker, I have an unfortunate message for the hopeful: the stockmarket is not there to make you money.

The stockmarket is there to help you look after money you have already made - to get a return.

Making a fortune is something you do in life and in business, but not in stocks and shares.

To turn $10,000 into $1 million in the stockmarket would be extraordinary, not ordinary.

And those TV advertisements showing a 20-something getting out of a limo in New York after trading forex on his mobile phone? They are not real.

Don't diversify

But let's not kill the dream. It may not be normal to make one hundred times your money in the stockmarket, but it is possible. So how do you do it?

Well, what you don't do is diversify.

A 'diversified portfolio' is not going to return 100 times your money, ever.

You will only achieve it through two techniques.

Find the Holy Grail

The first is to find one stock, one fantastic 'rocket under a rock', and ride it to a million or two - get a lot of stocks right consistently over a long period.

In other words, you need to develop a system that is successful at trading over a long, long time. You need to discover the Holy Grail.

Ignore the Warren Buffett way

So, here's some more bad news, I'm afraid. There isn't a Holy Grail. The closest the industry has got to it is 'the Warren Buffett way'.

Value investing is a Matrix, a mass delusion that the industry has nailed its flag to, and their process for decades has been to persuade potential and existing clients that 'this is the way', simply because they haven't got anything else to offer.

Ask any value fund manager.  Conservative value investing only works when the market falls. The rest of the time, it misses all the best bits.

Do you think value investors caught the Big Tech boom? Were they buying Apple, Meta, Microsoft, Amazon, Alphabet on a PE of more than 30 and Nvidia on more than 100?

Of course not. They were buried in Telstra, wagging their fingers at everyone else making money.

There is no Holy Grail, which leaves only one way to make 100 times your money in the stockmarket: buy one 
stock and have it go up 100 times.

A 100 times return is a 10,000% return. There are, amazingly, around 60 mainstream stocks that have, in their trading histories - if you timed it perfectly from all-time low to all-time high - returned more than 10,000%.

That's a lot better odds than you might imagine. Here are just a few of the highlights.

Biggest and fastest rises in history

• Poseidon went from 80c in September 1969 to $280 by February 1970. The boom to end all booms.
• Incitec Pivot went up 595,000% between 2005 and 2015.
• Fortescue Metals turned $10,000 into $73,166,166 between September 1990 and June 2008 - 17.8 years. This is the biggest single return of any stock over any period in the All Ords.
• UXC Ltd turned $10,000 into $6 million between June 1998 and March 2000 - 1.8 years - in the tech boom. You probably remember it as Davnet. 
• Paladin turned $10,000 into $13.5 million between April 2003 and April 2007 - four  years. Third-biggest return and the third fastest. I once held a million shares of Paladin at 1.6c. Sold them at 3.2c. Ouch.

Other stocks that have done remarkable things with $10,000 include News Corp, which turned it into $26,692,393 in 25.4 years; BHP, $2,543,468 in 42.2 years; and QBE, $12,165,775 in 32.7 years.

Others that have achieved it include ANZ, RIO, Woodside, Origin, Santos, Leighton Holdings, Coca-Cola Amatil and Lend Lease.

The list goes on.

Bottom line: it is possible, but it will not be easy and it could take 42 years.

And I ask, how on earth are you going to stop yourself from selling when you have doubled your money to $20,000? And what are you going to do when it falls on day one? And the big one: which stock do 
I start with?

I have written before about how pitiful the real average return from the stockmarket actually is - post-tax, inflation, transaction costs, management costs and the index fudge.

Because of that, the stockmarket is not about averages and diversification; it is about timing and buying stocks that go up.

The pursuit of $1 million with $10,000, as unrealistic as it is, is the best bit of what the stockmarket game is all about. It's not about pretending to be a fund manager, hiding in the average and relying on the long term.

It's not about value. It's not about compounding returns.

It's about finding stocks that go up and avoiding stocks that go down. It's about thinking it's possible and applying yourself to the task.

And even if you come up 9900% short, you've still doubled your money.

There's always something going on in the stockmarket if you're prepared to do the legwork, be hypervigilant, be quick to buy, quick to sell, and you're unemotional and disciplined.

On your screen right now is the next Davnet, Fortescue, Paladin, Nvidia, Afterpay and Poseidon. What a fantastic intellectual pursuit.

Tip to the wise: the best way to filter for one hundred-baggers is to search for ten-baggers.

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