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Winning The Game Of Stocks: How to Get Rich Investing in Stocks by Adam Khoo
If you want to learn how to invest successfully in the stock market and achieve financial freedom, then you should read this book by Adam Khoo. In this book, you will discover the proven strategies, techniques, and principles that have helped thousands of people around the world become wealthy through stock investing. You will also learn how to overcome the common challenges and pitfalls that most investors face, such as fear, greed, lack of knowledge, and emotional biases. By the end of this book, you will have a clear understanding of how the game of stocks works and how you can win it.
Winning The Game Of Stocks Adam Khoo.pdf
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Introduction
In this introduction, you will learn who is Adam Khoo and why you should listen to him, what is the game of stocks and how can you win it, and what are the benefits of reading this book.
Who is Adam Khoo and why should you listen to him?
Adam Khoo is a self-made millionaire, best-selling author, professional speaker, and entrepreneur. He started investing in stocks when he was 18 years old and became a millionaire by the age of 26. He has since built a multi-million dollar portfolio that generates passive income for him every month. He is also the founder of Adam Khoo Learning Technologies Group, one of Asia's largest private educational institutions that offers courses on personal development, wealth creation, business excellence, and leadership. He has written 16 books on various topics, including Winning The Game Of Life!, Secrets Of Self-Made Millionaires, Secrets Of Millionaire Investors, Profit From The Panic, Master Your Mind Design Your Destiny, I Am Gifted So Are You!, NLP: The New Technology Of Achievement, Secrets Of Building Multi-Million Dollar Businesses, Clueless In Starting A Business, and of course, Winning The Game Of Stocks! He has also been featured in numerous media outlets, such as The Straits Times, The Business Times, The New Paper, Channel News Asia, CNBC, Bloomberg, and Forbes. He is widely regarded as one of the most respected and influential financial educators and motivational speakers in Asia.
What is the game of stocks and how can you win it?
The game of stocks is the process of buying and selling shares of companies that are listed on a stock exchange. The goal of the game is to buy low and sell high, or to buy high and sell higher, in order to make a profit. The game of stocks is not a gamble, a lottery, or a get-rich-quick scheme. It is a skill that can be learned and mastered with the right knowledge, tools, and mindset. To win the game of stocks, you need to understand the fundamentals of stock investing, the technicals of stock trading, the strategies of stock investing, and the psychology of stock investing. You also need to have a clear plan, a sound system, and a disciplined approach. In this book, you will learn all these aspects in detail and how to apply them in your own investing journey.
What are the benefits of reading this book?
By reading this book, you will gain many benefits that will help you achieve your financial goals and dreams. Some of these benefits are:
You will learn how to invest in winning stocks that generate high double-digit returns
You will learn how to identify market uptrends and downtrends accurately
You will learn how to hedge and protect your portfolio from market crashes
You will learn how to short sell and profit in a down-trending market
You will learn how to manage your risks and maximize your returns
You will learn how to develop the psychology of a disciplined investor
You will learn how to build a winning portfolio that suits your investment goals
You will learn how to build a passive income stream from real estate investment trusts (REITs)
You will learn how to build a multi-million dollar net worth on an average income
Are you ready to start winning the game of stocks? If yes, then let's dive into the first chapter!
Chapter 1: The Power of Investing
In this chapter, you will learn why investing is the best way to achieve financial freedom, how to overcome the common myths and fears about investing, and how to develop the mindset and habits of a successful investor.
Why investing is the best way to achieve financial freedom
Financial freedom is the state of having enough passive income to cover your living expenses without having to work actively for money. It means that you have the freedom to choose what you want to do with your time, energy, and resources. It means that you have the freedom to pursue your passions, hobbies, interests, and causes. It means that you have the freedom to live your life on your own terms.
However, most people are not financially free. Most people are trapped in the rat race of working hard for money but never having enough. Most people are living paycheck to paycheck, struggling with debts, bills, taxes, and inflation. Most people are dependent on their jobs, bosses, clients, or customers for their income. Most people are trading their time for money but never achieving their true potential.
Why is that? It's because most people don't know how to invest their money wisely. They either don't invest at all or they invest poorly. They either save their money in low-interest bank accounts or they spend their money on liabilities that depreciate in value. They either follow the herd mentality or they fall prey to scams and schemes. They either lack the knowledge or they lack the discipline.
If you want to break free from this cycle of mediocrity and misery, you need to start investing your money in assets that appreciate in value and generate passive income for you. You need to start investing your money in stocks.
Stocks are shares of ownership in companies that are listed on a stock exchange. When you buy stocks, you become a part-owner of those companies and you share in their profits and growth. Stocks are one of the best ways to invest your money because they offer many advantages over other types of investments. Some of these advantages are:
Stocks have historically outperformed other asset classes such as bonds, gold, real estate, and commodities over the long term
Stocks offer high returns with low capital requirements compared to other investments such as businesses or properties
Stocks provide liquidity and flexibility as you can buy and sell them at any time with minimal fees and hassle
Stocks offer tax benefits such as capital gains tax exemption, dividend tax credit, and tax-deferred or tax-free accounts
Stocks allow you to participate in the growth and innovation of various industries and sectors
Stocks give you voting rights and influence over the companies you own
By investing in stocks, you can grow your wealth exponentially over time and achieve financial freedom. However, you need to know how to invest in stocks the right way. That's what this book will teach you.
How to overcome the common myths and fears about investing
Before you start investing in stocks, you need to overcome some of the common myths and fears that may hold you back from taking action. Here are some of them and how to debunk them:
Myth: Investing is too complicated and difficult for me. Truth: Investing is not rocket science. You don't need a degree in finance or economics to invest successfully. You just need to learn some basic concepts and principles that are easy to understand and apply. This book will explain them to you in simple terms and examples.
Myth: Investing is too risky and I might lose all my money. Truth: Investing involves risk, but it's not gambling. You can reduce your risk by doing your research, diversifying your portfolio, following a proven system, and using risk management techniques. This book will show you how to do all these things.
Myth: Investing is too time-consuming and I don't have enough time for it. Truth: Investing doesn't have to take up a lot of your time. You can invest as little as 15 minutes a day or a few hours a week, depending on your style and strategy. You can also use tools and resources that can help you automate and simplify your investing process. This book will introduce you to some of them.
Myth: Investing is only for the rich and I don't have enough money for it. Truth: Investing is for everyone, regardless of your income level. You can start investing with as little as $100 or even less, depending on the platform and broker you use. You can also save more money by cutting down on unnecessary expenses and increasing your income sources. This book will give you some tips on how to do that.
Myth: Investing is boring and I don't have any interest in it. Truth: Investing can be fun and exciting if you have a passion for learning and growing. You can enjoy the thrill of finding great opportunities, making smart decisions, and watching your money grow. You can also find satisfaction in contributing to the success of the companies you invest in and the causes they support. This book will inspire you to develop a love for investing.
Don't let these myths and fears stop you from investing in stocks. They are not true and they are not helpful. Instead, embrace the reality and the benefits of investing in stocks. They are worth it.
How to develop the mindset and habits of a successful investor
Besides overcoming the myths and fears about investing, you also need to develop the mindset and habits of a successful investor. These are the qualities that will help you achieve consistent results and long-term success in the stock market. Here are some of them:
Mindset: Have a clear vision of your financial goals and why they matter to you. This will motivate you to take action and stay focused.
Mindset: Have a growth mindset that embraces learning, feedback, challenges, and mistakes. This will help you improve your skills, knowledge, and performance.
Mindset: Have a positive mindset that expects success, sees opportunities, and celebrates achievements. This will boost your confidence, optimism, and resilience.
Habit: Have a plan that outlines your investment objectives, strategies, criteria, rules, and systems. This will guide your actions and decisions.
Habit: Have a routine that schedules your investing activities, such as reading, researching, analyzing, buying, selling, reviewing, and adjusting. This will ensure your consistency and efficiency.
Habit: Have a journal that records your thoughts, emotions, actions, results, and lessons learned from each investment experience. This will enhance your awareness and learning.
These are some of the mindset and habits that you need to cultivate as an investor. They will help you stay focused, motivated, and disciplined in your investing journey. They will also help you avoid some of the common mistakes that many investors make, such as chasing hot tips, following the crowd, overreacting to news, and trading too frequently.
Now that you have learned the power of investing, how to overcome the myths and fears about investing, and how to develop the mindset and habits of a successful investor, you are ready to move on to the next chapter. In the next chapter, you will learn the fundamentals of stock investing.
Chapter 2: The Fundamentals of Stock Investing
In this chapter, you will learn what are stocks and how do they work, how to analyze a company's financial performance and growth potential, and how to value a stock and determine its intrinsic worth.
What are stocks and how do they work?
As mentioned earlier, stocks are shares of ownership in companies that are listed on a stock exchange. When you buy stocks, you become a part-owner of those companies and you share in their profits and growth. But how do stocks work exactly? Here are some key concepts that you need to understand:
A company issues stocks to raise capital from investors. The capital can be used for various purposes, such as expanding operations, launching new products, paying off debts, or acquiring other companies.
A company can issue different types of stocks, such as common stocks or preferred stocks. Common stocks give investors voting rights and dividends (a portion of the company's earnings distributed to shareholders). Preferred stocks give investors priority in receiving dividends and assets in case of liquidation, but no voting rights.
A company can issue a fixed number of shares or increase or decrease the number of shares over time. The number of shares issued by a company is called its share capital. The share capital can be divided into authorized shares (the maximum number of shares that a company can issue), issued shares (the number of shares that a company has actually issued), and outstanding shares (the number of shares that are held by investors).
A company can also issue additional shares to existing shareholders at a discounted price. This is called a rights issue. A rights issue can be used to raise more capital or to reduce the company's debt-to-equity ratio.
A company can also reduce the number of shares by buying back some of its own shares from investors. This is called a share buyback or a share repurchase. A share buyback can be used to increase the earnings per share (EPS), improve the return on equity (ROE), or signal confidence in the company's future prospects.
A company can also split or reverse split its shares to change the number of shares without changing the share capital. A share split increases the number of shares and reduces the price per share proportionally. A reverse share split does the opposite. A share split or reverse split can be used to make the shares more affordable or more attractive to investors.
A company's stock price is determined by the forces of supply and demand in the market. The stock price reflects the perceived value of the company by investors based on various factors, such as earnings, growth, dividends, news, rumors, sentiment, etc.
A company's stock performance is measured by various indicators, such as price change, percentage change, volume (the number of shares traded), market capitalization (the total value of all outstanding shares), beta (the measure of volatility relative to the market), dividend yield (the annual dividend divided by the current price), earnings yield (the annual earnings divided by , which calculates the percentage difference between a company's financial performance in two periods; and index number analysis, which assigns a base year value of 100 to a company's financial performance and compares the subsequent years' values to the base year value.
Vertical analysis is the comparison of a company's financial performance across different line items. Vertical analysis can be done using various methods, such as common size analysis (as explained above), component percentage analysis, which calculates the percentage of each line item to the total within a financial statement; and ratio-to-base analysis, which calculates the ratio of each line item to a selected base item within a financial statement.
DuPont analysis is a framework that breaks down a company's return on equity (ROE) into three components: profit margin, asset turnover, and financial leverage. DuPont analysis can be used to identify the sources of a company's profitability and efficiency, as well as the risks associated with its capital structure. The formula for DuPont analysis is as follows:
\\begin aligned&\\text ROE =\\frac \\text Net income \\text Shareholders' equity\\\\&=\\frac \\text Net income \\text Revenue \\times \\frac \\text Revenue \\text Total assets \\times \\frac \\text Total assets \\text Shareholders' equity\\\\&=\\text Profit margin \\times \\text Asset turnover \\times \\text Financial leverage\\end aligned ROE = Shareholders' equityNet income = RevenueNet income Total assetsRevenue Shareholders' equityTotal assets = Profit margin Asset turnover Financial leverage
These are some of the techniques that you can use to analyze a company's financial performance and growth potential using its financial statements. By applying these techniques, you can gain valuable insights into a company's strengths and weaknesses, opportunities and threats, and competitive advantages and disadvantages.
How to value a stock and determine its intrinsic worth
Another important skill that you need to have as an investor is the ability to value a stock and determine its intrinsic worth. This will help you decide whether a stock is undervalued or overvalued by the market and whether you should buy or sell it. There are many methods and models that you can use to value a stock and determine its intrinsic worth, but one of the most common and widely used ones is the discounted cash flow (DCF) model.
The discounted cash flow (DCF) model is based on the premise that the value of a stock is equal to the present value of its future cash flows. In other words, the value of a stock is equal to the sum of all the cash that it will generate for its owners in the future, discounted by an appropriate rate that reflects the risk and opportunity cost of investing in that stock. The formula for the DCF model is as follows:
\\begin aligned&\\text Value of stock =\\sum _t=1^n \\frac FCF_t (1 + r)^t\\\\&\\textbf where:\\\\&FCF_t=\\text Free cash flow in year t\\\\&r=\\text Discount rate\\\\&n=\\text Number of years\\end aligned Value of stock = t=1n FCFt(1 + r)t where: FCFt = Free cash flow in year t r = Discount rate n = Number of years
To use the DCF model, you need to estimate two main inputs: the free cash flow (FCF) and the discount rate (r). The free cash flow (FCF) is the amount of cash that a company generates after deducting all the expenses required to maintain or expand its business. The discount rate (r) is the rate of return that you require or expect to earn by investing in that stock. The discount rate can be estimated using various methods, such as the capital asset pricing model (CAPM), which calculates the cost of equity based on the risk-free rate, the market risk premium, and the beta coefficient of the stock.
Let's say you want to use the DCF model to value RoboBasketball's stock. You estimate that RoboBasketball's free cash flow will grow by 5% annually for the next 10 years and then by 3% annually in perpetuity. You also estimate that RoboBasketball's discount rate is 10%. Using the DCF model, you can calculate the value of RoboBasketball's stock as follows:
\\begin aligned&\\text Value of stock =\\sum _t=1^10 \\frac FCF_t (1 + r)^t + \\frac FCF_11 (r - g) \\times (1 + r)^10\\\\&=\\frac 100 \\times 1.05 (1 + 0.1)^1 + \\frac 100 \\times 1.05^2 (1 + 0.1)^2 + ... + \\frac 100 \\times 1.05^10 (1 + 0.1)^10 + \\frac 100 \\times 1.05^10 \\times 1.03 (0.1 - 0.03) \\times (1 + 0.1)^10\\\\&=\\$2,789.6\\text million\\end aligned Value of stock = t=110 FCFt(1 + r)t + FCF11(r g) (1 + r)10 = (1 + 0.1)1100 1.05 + (1 + 0.1)2100 1.052 + ... + (1 + 0.1)10100 1.0510 + (0.1 0.03) (1 + 0.1)10100 1.0510 1.03 = $2,789.6 million
This means that the intrinsic value of RoboBasketball's stock is $2,789.6 million, or $27.90 per share (assuming there are 100 million shares outstanding). If the current market price of RoboBasketball's stock is lower than $27.90 per share, you might consider buying it as it is undervalued by t