Value Momentum

Investing Course Lesson 10

The Psychology of
Winning Investors

By Adam Khoo
Professional Stock & Forex Trader

www.piranhaprofits.com
www.wealthacademyglobal.com
 =

30% 70%
PSYCHOLOGY
 Psychology of Successful Investors
1) Discipline:
• Buy and Sell On Pre-determined Rules (i.e. Fundamental/Technical Rules)
• Never Buy and Sell Based On Rumours, Emotions and the Opinions of Others
• Never Buy from a ‘Fear of Missing Out (FOMO)’ and Never Sell in ‘Panic’
A Lesson on Discipline from Warren Buffett

om
bo
om
tc

Dot com crash

Do

• Buffett avoids technology stocks and avoids buying overvalued

stocks
• Buffett is down 23% in 1999 Versus +18% Gain in the S&P 500
• Ridiculed for sticking to his investment rules
• After the bubble burst, Buffett gained 80% over the next two
years while the NASDAQ lost 72% and S&P500 lost 28%.
 Psychology of Successful Investors

2) Flexibility:
• When the Facts Change, Change Your Mind!
• Be Willing to Sell At a Loss When An Investment Becomes lousy
• Never stubbornly hold onto a losing investment (Ego) or Fall in Love With a Stock
 Psychology of Successful Investors

3) Hardwork:
• Invest only in what you understand and have thoroughly researched
• Stay Within Your ‘Circle of Competence’
• Never Blindly Rely on Recommendations and Tips from ‘Experts’
• Research Every Investment, Monitor Regularly and Keep Records
 Do Not Blindly Follow The
Recommendations of Analysts

November 8, 2011
Buy Noble at $1.56?
Target price $2.05?
$1.56
What Was the Problem?
• Company debt was too high
• Cash flow from operations
negative
• Price on a downtrend
• Stock price was overvalued

-31%

$1.08
$1.08

—59%

$0.45
 June 21, 2012

S&P 500 Rises +7%

 Psychology of Successful Investors

4) Be Patient and Think Long Term

• Most investors abandon their investment strategy and fail because they grow impatient
when they do not get rich overnight
• Successful investing is not a ‘get rich quick’ method but a ‘get rich slow and sure’
method
• It takes years for small money to grow and compound into HUGE SUMS.
 Psychology of Successful Investors
5) Think Independently
• The majority of investors lose money in the stock markets
• To profit, you must think differently from the masses!
• Be Fearful when others are Greedy and Greedy When Others Are Fearful
 Psychology of Successful Investors

6) Risk Management and Capital Protection

• Always risk a small percentage of your capital on any single investment
• Always diversify your risks. There is no ‘sure win’ in the markets

7) Take Responsibility and Learn from Mistakes

• Never blame the market, your luck, your broker or an external source for your results
• Taking Responsibility puts you in CONTROL of Your Results

8) Never Attempt to ‘Predict’ the Market

• The market cannot be predicted and any attempt to do so leads to bad performance
• Decisions should always be made about ‘Fundamentals/ Valuation’ and ‘Trends’
• Having a ‘Predictive Mindset’ causes us to not follow our pre-determined rules
 So Who Was Right?

6 Oct 2009
 +12.4%
Trump Wins Election
 Dec 1996
S&P 500 750 Points

December 1996
“ Investors are undergoing a bout
of irrational exuberance” - Alan
Greenspan FED Chairman
 Feb 2000
S&P 500 1,500 Points

Dec 1996
S&P 500 750 Points
March 2007
“ The Subprime mortgage crisis
is largely contained” - Ben
Bernanke, FED Chairman

March 2007
S&P 500 1,375 Points
March 2007
S&P 500 1,375 Points

Feb 2009
S&P 500 700 Points
 Predictions Are Futile

+329%
+329% Gain
Gain
From 2009-2018
From 2009-2018
> 16% a year
> 16% a year
 Value Momentum
Investing Course Lesson 10
The Psychology of
Winning Investors

By Adam Khoo
Professional Stock & Forex Trader

www.piranhaprofits.com
www.wealthacademyglobal.com