Transcription
To me, this strategy—I mean, I've traded all kinds of option strategies: straddles, strangles, iron condors, every damn thing I trade. Okay? And to me, this is my favorite because, to me, it is—it is almost the holy grail of trading. All right?
I always say that there are a lot of great trading strategies out there, not just what I thought. There are many, right? But if you don't manage your money properly, uh, with proper position sizing and risk management, any good trading strategy can blow up your account if you are too aggressive. All right. But if you're not greedy, if you learn to be conservative, you can—you can actually do very, very well.
Could you share some of your biggest winners and your biggest losers in terms of your investments? Uh, Palantir so far has uh more than 10x. Nvidia also more than 10x. If you look at the last 70–80 years in the market, right, 78% of all years was bullish. 78%. 22% are bearish. So if you think about it, every time you short the market, your odds of making money is 22%.
I'm sure you already know by now, this year has been a little bit tough for the stock market. With all the talks about trade wars, tariffs, and even the potential of a recession, the market did hit correctional territory in early April. And the golden question everyone is asking right now is, should I still buy the dip? What if the dip just keeps on dipping? And what if this time is actually different? Well, our guest today believes otherwise, that this time is not any different, and he's buying more stocks. According to him, this is how you make millions in the stock market.
Adam Coup is an award-winning Singaporean entrepreneur, best-selling author, and a professional investor and options trader. He's also one of the most watched financial mentors on YouTube, with his channel clocking in over 55 million video views and over 2 million subscribers. Our conversation today with Adam Coup couldn't have come at a better timing. With so much uncertainty going on in the markets this year, the Humble Traders podcast is here to help.
In our conversation with Adam today, you're going to learn his insights on where the market is going this year. Are we heading towards a recession, and is this time actually different? Adam's approach to long-term investing, how he selects the stocks to trade, the criteria he looks for, and how he executes his entries, risk management, and taking profit. Last but not least, we're going to learn about how he uses option strategies to hedge and trade around his investments in order to generate income. How he also stays calm while managing a 4.6 million portfolio.
Look, I understand nobody could actually predict where the market is going, but I got to say there's just been so much doom and gloom these days in the market and the news, and I personally want some voice of reason and rationality. So, I flew all the way here to Singapore to make this podcast happen. So, remember to hit the like button down below and let's get ready for an insightful conversation about the stocks and the state of the market with Adam Coup.
Adam, let's start with a question that everyone has in mind right now.
Sure.
Is the bottom in on the market? What do you think?
Uh, as always, you can never predict 100% because there are so many moving parts—you have no idea what Trump will do when he wakes up. But based on the technical analysis, I—I think yes, I think we have more or less bottomed.
Okay.
Right. Yeah. So do you think right now is a good time to buy more stocks that you've been eyeing, or is it a better time to kind of wait and hold off and see—kind of see what happens, like a lot of people are talking about?
Well, it was a better time last week, right? And I was adding—I was adding last week, right? So I always tell people that there's no best time to buy because you never know where's the bottom, right? But there's always a good time to buy, and there are many good times. So to me, as an investor, as long as the price is below the intrinsic value and it's at a support level, it's a good time.
Yeah.
Of course, after you add it at a support level—undervalued—it could break support and get even more undervalued. You never know, right? So if that happens, then it's another good time. So I always average in my positions. So that's the difference between like investing and trading. So for investing, it's averaging in slowly, right? Trading is—I just—so I do trade as well. So for trades, I enter a trade uh at a potential reversal or bottom, and of course, my stop loss is there and profit target is there. If I can stop down, I wait for the next bullish reversal. Then I enter again with another stop loss there. So the—the key in trading is to enter at potential reversals, at potential bottoms. You never know, it could break the stop, right? But for investing again, I—I average in these positions.
So, it sounds like from what you just said, trading involves a little bit more precision—precision with your entries and exits, and investing—is it true that it sounds a little bit more forgiving, and very—I mean, investing is very forgiving.
Yeah, absolutely. Right. I mean, provided you invest in very, very, very safe companies, which is—which is what I do. So I only invest in companies that are very high quality, very consistent growth in revenue, free cash flow, they are undervalued, high uh return on capital. So these companies are ones where I know 99% of the time they're going to be higher in 5 to 10 years. Okay? Right? But short-term they could go anywhere, right? So as long as you're patient, you got holding power, it's almost impossible to lose money when you invest in great companies, a portfolio of them. All right? Of course, a single company can—can get into trouble, like—like Boeing or Disney. You never know, right?
I see.
But when you buy a portfolio of at least 10 or 20 great companies, uh, cumulatively it's impossible to lose money over the long run.
That's good to hear. Um, I think obviously before last week there was a lot—a lot of doom and gloom, a lot of talks in the media about how this year is different.
It's always different.
That's what—it's always different. We're heading into a recession. How the market for 2025—we're going to go lower. So I'm glad you are providing a little bit more calm and rationality right now.
Yeah.
So before we dive into the nitty-gritty details, you're well—well known online on YouTube and of course in Singapore, but for the—a lot of my viewers who don't know about you yet, could you tell us who are you? What kind of investor or trader you are and what's your experience been like in the market?
Okay, so uh I started investing at 17 years old. So now I'm—I'm just—I just turned 51. So since I started, I've been through all kinds of styles, right? So in my early years, I did a lot more trading than investing—one reason is because I guess my capital was smaller—so smaller capital, you're more thinking how do I grow it faster, right? So that time I focus on uh a lot of uh forex trading, day trading, swing trading. I traded stocks, CFDs, you name it, I traded it. Then over the years, as my capital grew, um, then I started to focus more on investing, and I still do trading 'cause I love it. It's a lot of fun. Um, but I do more nondirectional trading than directional trading. So today I would say about—yeah, about 85% of my portfolio are investments—uh long-term investments of great companies I buy. So I only focus on high-quality companies that I buy when they are undervalued. Right? So 85% is that right? And the rest would be trading. uh, and most of the trading I do is using options.
Oh, okay.
And uh like most people in the early days, I focus on option buying. So I thought that, you know, I was bullish on a stock, I buy a call. If I'm bearish, I buy a put, right? And then I realized that over the long run that method—um, the odds are against you because, you know, when you buy an option, options are decaying assets. Okay. Okay. So, every day you hold the option is losing money, losing money, losing money. And when you buy an option, you can only make money if the price goes up significantly. All right? If the price goes up slowly or goes sideways or goes down, you lose money. So, when you buy options is like buying the lottery. Once in a while, you can make a lot of money, but more often than not, you're going to lose money. So, that's what happened to me in the—in the early days, right? So, I made a lot and then suddenly I lost it all. So I was very frustrated and I said, "Okay, if I'm losing all this money, who's making all the money? The—the person making all the money is the guy selling me the options?" So then I realized that the way institutional option traders make money consistently for their banks is by selling options, not buying options. So that's when I had this big—So I would say, yeah, for the last uh nine years, I focus mainly on option selling. So I sell, and I would say out of the options I sell, 99% are selling put options on good companies. So I sell cash-secured put—put options, and uh sometimes if I—if I want to trade stocks that are maybe more speculative, okay, not uh ones that I want to own a shares, then I'll do what we call credit spreads—I see where I'll sell—boo spreads, right? Sell a put and buy another put to protect the first put, and then I do another type called jade lizards, right? uh, which is another uh way of credit selling. Yeah, so mainly that—that—that's what I do. So 85% investing and 15% trading—a lot of it options on the sell side—and for my 85% of investing uh is further broken down into mainly I would say about 65% capital gain investing in the US markets, okay, and the rest will be more dividend investing where I focus on yield—I invest in uh Singapore listed REITs, uh dividend stocks, uh private credit and—and bonds.
Oh, so it seems—seems that you have a lot of experience not just as an investor but also as a trader as well.
Yeah, that's how I started—many different things. Yeah. So, so in the early days, I—I was very much using technical analysis. A lot of technicals, a lot of technicals. Um, and today when it comes to investing, I would say it's—it's 90% fundamentals and 10% technicals.
Oh, okay.
Um, did you have any mentor figures in investing or trading that got you started in the early stages?
Not personally. Uh, so I—I modeled very much so my style is very much modeled against uh Warren Buffett, Peter Lynch, Charlie Munger when it comes to the fundamental part of it. Uh, for the technical part of it, I modeled very much uh Victor Sperandeo. Okay. Uh, who was—I don't know if—if you've heard of Victor Sperandeo. He was very big in the 80s. Uh, he wrote two—uh two of some of—two great books on trading. Uh, one is called *Methods of a Wall Street Master*. Okay. And the other one is uh *Principles of Professional Speculation*. So he was one of the greatest Wall Street traders in the 80s and 90s. Uh, so yeah, so I would say that a lot of what I know about technical analysis actually came from Victor Sperandeo.
What were some of his main principles that you learned and you still apply to today?
Uh, trend identification—of trend and trend reversals. So one of the most powerful things I learned about him was uh whatever market, okay, uh you look at the uh 50 and 150 simple day uh simple moving average. Okay, to determine your medium-term trend. So basically, if the 50 is above the 150 simple moving average, you're on a very clear uptrend. I see. All right. Right? And when the 50 crosses below the 150 with the moving averages sloping down, it's a confirmed downtrend. So, one of the things that I—I learned about that is not just, you know, people talk about moving average crossovers a lot, right? But that doesn't work unless you look at the slope of the moving averages.
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So what Victor talked about is that the slope is as important as the crossover. Like if you look at the 200-day moving average, right? A lot of people think that okay, if the price goes above the 200-day, you're in a long-term uptrend. It's very bullish. No. Okay. So there are many times the price goes above the 200-day and then goes back below the 200-day. So the important thing is that 200-day has to slope up for the trend—the uptrend to be confirmed. Same thing when price breaks below the 200-day—people say, "Oh my god." All right. No. Many times if the price breaks below the 200-day but the 200-day is sloping up, the trend is still up, right? So the 200 has to slope down. So that was one of the key things I—I learned back then, and you would apply that in your investing as well as trading—uh, not so much in—okay, so in my—in the old days, I used to—when I invest, I look at okay, great company undervalued, and I only wanted to buy on an uptrend. Oh, I see. All right. So in all this, if I look at a great company undervalued but on a downtrend, I'll not touch it. I'll say, okay, I'll wait for the uptrend. Okay. So only on an uptrend will I get in, which—which worked well. I—I made good money, but I realized that by the time the uptrend was confirmed, the price is already up like 25–30% from the bottom. Yes. Okay. So I said to myself that if I'm investing for the long run, I'm in this company for several years, you know, does it matter if I buy on a downtrend and it gets a bit lower? It doesn't really matter, right? Because it's better to buy as slow as you can so you capture a lot more upside. So because of that, today, even if it's on a downtrend, I'll still buy it. But of course, I won't just blindly buy it on a downtrend. I want to see signs of a reversal. So as we know that on a downtrend, you have got what we call the impulsive wave down pattern, right? Wave down, then wave up, wave down, wave up. So obviously on a downtrend, if it's waving up, you don't get in, right? Because after a wave up you get in, it could wave down again. Yeah. So on a downtrend, I always wait for what we call a parabolic drop. So price must drop very rapidly. Yeah. Capitulation. Okay. And if it drops rapidly to a very strong support that I identify on a higher time frame. Okay. So normally I would enter on a daily time frame. Right. Yeah, but if I—if I see there's a strong support on the weekly or the monthly time frame, strong support there, and price drops 90°—very sharp—and then I see a very strong bullish candle, like a bullish engulfing or pin bar, I'll add even before the uptrend is confirmed, or better still, I wait for a double bottom, a—a nice double bottom pattern, then I enter. So, so that's how I combine my fundamentals with the technicals I—I've used before. Oh, yeah. Yeah. So, I get in a lot—So, I get in a lot earlier than waiting for the uptrend, you know. I see. Okay. Wow. So, so even for your long-term investments, you—you still use the technicals—that because on my channel, a lot of the viewers are traders. So what you just said about technical analysis, support, pin bars, parabolics to a downside reversals, these are the terms that a lot of traders use and they utilize that for—to find the entries. Yeah. So I guess since you also have a previous trading background and you kind of utilize what worked for you for your entry style and what you learned from the books and you apply that to your investments to find better entries for yourself.
Yeah. And I also use it for my options trades as well. Yeah. So if I see a strong reversal pattern, then I would sell credit spreads. I'll sell put options. Below that support.
Amazing. So let's talk about some of your option strategies now. What's the purpose of uh trading options with your—you have your long-term investment portfolio, and you also said you trade options almost daily. What's the purpose of that? And how much are you trading in terms of options versus your long-term portfolio?
Okay, so okay, first of all, I'm a very, very, very conservative person. Extremely conservative. Uh, I don't use any leverage—zero—zero leverage. And in my investment portfolio, I would say—um, yeah, I would say less than 10%—I would—I would use—I would use uh for options—less than—I could use actually a lot more, but I use less than 10%. I'm just very conservative, and I guess one reason is once you accumulate a certain amount of wealth, you become more conservative because you don't need to take so much risk anymore, right? I guess if I was younger with less money, I would be more aggressive. I like, okay, you know, uh 50% options or 60%, right? But as you grow older and your capital gets bigger, it's like, you know, why take the risk, right? 10%. So, yeah, so probably less than 10%. And the main purpose of—of the options is to create extra income for my investment portfolio. All right? And to increase the returns, obviously, because as a long-term investor, how do you grow your wealth? Capital gain and dividends, right? And most of the companies that I buy, the dividends are very low. You know, your Nvidia and like the tech stocks. Yeah. Very low dividends, right? So mainly it's capital gains. But you know that the stock will not go up in a straight line. Okay. There will be periods when it goes through consolidations, periods when it goes on a downtrend. So in those periods, how do you create extra income while waiting for it to go up later, right? So that's where options come in. All right? So, so my favorite strategy is selling uh cash-secured puts. All right. So, basically, as you know, when you buy a put option, it's like buying insurance. So, I'm the guy who's selling insurance to people. I'm like the insurance company. So, I sell insurance and I collect premium. So, I only do it on—again—very safe, quality companies. For example, you look at Apple, for example. So, um, you know, I can't remember right now. I think Apple's trading about 200 bucks something like that—about $190, $200 right now, around there. So first thing is—so I think Apple's a pretty safe company, and uh so my intrinsic value for Apple is about uh 180—right there—about 180, right. Okay, so
What I do is first I wait for a wave down pattern. I must see a drop in the price. Right. So if Apple drops, be uh near the intrinsic value or below it. So let's say Apple drops to 180. Okay. Okay. Below that 190 price. Okay. Yeah. Drops to let's say 190, 180. Um, then, as you know, when price drops, volatility increases in the market; the VIX goes up, right? Okay. So at 190, sorry, at 180, could I buy the shares? Yeah, I could, if I wanted to. Right. Nothing wrong, but what I do is I play hard to get. So I sell a put option at, say, about 170 strike price. I see. So when I sell a put option at 170 strike price, I collect a premium, okay, and I am now obligated to buy the shares at 170, which is a strike price, if it gets there.
Yeah. Okay. So what happens is that I normally sell about 30 to 45 days to expiration. That's that's what I do. So in the next 30 to 45 days, what happens if Apple goes up? If Apple goes sideways, or Apple goes down, uh, but doesn't go below 170, the options become worthless. Now, even if the price goes below 170, it doesn't matter, but by expiration, it needs to be at 170 or above. In all these scenarios, the options will be worthless, and I collect premium, so it's kind of like collecting free money every month.
Oh, okay. And the only, what's the downside? Okay. So the downside, okay. So the downside is if if Apple drops below 170 and stays below 170. I see. By the expiration, if I don't do anything, then the options will be exercised automatically, and I'll be assigned 100 shares of Apple at 170.
Oh, that's a pretty good deal. You said you want to be willing to own the stock as well. Which is a pretty good deal. But remember that when I sell the put option, I collect premium up front, which let's say I collect, example, $4 in premium, right? So I already have the $4. So if I buy Apple at 170 minus $4, so that's 164. So my net, my net purchase price is 164, which means I'm buying Apple at a discount. So when you sell a put option, you either get free money or you buy the shares at a discount.
Okay? Now, at the last moment, if I disc, if I uh, if I say I don't want the shares, you know what? I don't feel like buying the shares anymore. Now what I could do is I just buy back that put option I sold at a loss, right? Cuz I sold the put, and but now that the price dropped, the put is now trading at a higher price. So I have to buy the put back at a loss now. Okay. To close the position. So once I buy the put back, I'm no longer obligated to buy the shares.
Right. But I make a loss, right? Yeah. Then what I do is I simultaneously sell another put option at the same strike price or lower. So now maybe I sell the put at, instead of 170, I sell at say 165. Okay. With a further expiration date, another 45 days, and then I collect a new set of premium to cover the loss of that old put. So we call this rolling the put down. So by rolling the put, I delay owning the shares, but I reduce my strike price from 170 to 165. So now I need to buy the shares at 165, no longer 170, right? Uh, and then and then I keep repeating this. I keep repeating this until the option expires worthless.
Okay? And to me, this strategy, I, I mean, I've traded all kinds of option strategies from straddles, strangles, iron condor, every damn thing I've traded. Okay? And to me, this is my favorite because, to me, it is it is almost the holy grail of trading because you can't lose. It's impossible to lose money as long as you do this on very safe companies. Okay? I mean, personally, I would not dare to do it on Tesla or Palanteer or whatever, right? Although I own Palanteer as an investor, I wouldn't dare to do it in Palanteer because Palanteer, Tesla, these are way overvalued.
I see. And they are they, I mean, how do you say? And some of these companies, the profits are not as consistent. All right? They're still very erratic. So I wouldn't dare to do it on, but I'll do it on Walmart. I'll do it at Costco. Yeah, sure. These are slow. Not necessarily slow, predictable. Not necessarily slow. Like I'll do it on Nvidia, right? Nvidia is not slow, but Nvidia, strong cash flow. Yeah. All right. I'll do it on Meta. I'll do it on Amazon. I'll do it on Microsoft. Right. So it's not a matter of fast. So it's how predictable are the earnings.
I see. Right. So so that's the key to it. So like I said, to me, it's like a holy grail. It's like a win-win. I can't lose. Right. And I've got, I've taught this to many many people now. But if you learn this, you can get into trouble. In there are two ways you can get into trouble. Number one, if you do this on companies that are not high quality and are overvalued. They can drop significantly and not come back for a long time. Then you are screwed, or they may never come back. Then you're really screwed, right? So you must be very sure of the fundamentals. Okay. Number one. Number two, you can get into trouble if you overlever.
Okay. So there are people who learn this and they get very excited. Wow, this is like free money, right? And they sell all these puts, but they don't actually have the cash to take the shares if they happen to be assigned the shares, and they don't have enough buying power to keep rolling down the put. Okay. So it becomes dangerous if we go into a protracted bare market. So if you go into a bare market like 08-09 where the bare market lasts two years and you don't have the buying power to keep rolling the put, what happens then? You get a margin call; the broker forces you to close the position, and you could end up with huge losses. Okay. So so like any trading strategy, all right, I always say that there are a lot of great trading strategies out there, not just what I thought, there are many, right? But if you don't manage your money properly, uh, with proper position sizing and risk management, any good trading strategy can blow, blow up your account if you are too aggressive. All right. But if you're not greedy, if you learn to be conservative, you can you can actually do very, very well.
So would you still do those same um selling put options in the current market right now? Yeah, I'm doing that. I've been I've been doing that. Right. So in fact, so I, you know, on that day, I can't remember which day that was. It was this big red candle. I think like April 2nd. April 2nd, right? Maybe. Maybe. Yeah. Yeah. So on those days when when it spikes down, the VIX goes crazy; those are the days I sell options because when the VIX is very high and you sell options, you get very high premium, and the strike price of the put is very far from the current market price. So you get a very good deal, right? I see. Um, now that after this drop, the last few days, the market has been like rebounding. Right. At this point, I wouldn't sell put options anymore.
Oh, when when markets kind of reversing. Yeah. So so the rule is I only sell after a wave down. I never sell after a wave up because wave down you get high volatility, you get good option premium. Now the market recovers, VIX drops. Yeah. Premium. VIX drops. You don't get very good premium anymore. Right. And after a wave up, the other reason I don't want to sell uh is because you you could get another retracement down. Right. Now when I sell call options, uh covered call options, not as often, but I sell covered call options when, so I own a great company and after a very strong wave up, like when it goes parabolic, normally there's a retracement or there's a consolidation, right? So normally when there's a strong wave up, then I sell covered call options uh to collect premium.
I see. Yeah. So that's the opposite, right? Wave down, sell puts, wave up, sell calls. Uh, and both of these are with the intention or the purpose of collecting income for yourself, as a collecting income. Yeah. So you don't, do you ever use options to hedge for your portfolio? I used to, in the past. So in in the old days, whenever I I would see, okay, it's a it's a correction, it's a bare market. I'll buy a lot of put options to hedge uh my investment portfolio, and I'll also buy call options on the VIX uh and I also uh buy uh bare put spreads, which is basically you buy put options and then sell put options, which is a it's a cheaper way than selling direct, uh sorry, it's a cheaper way than directly buying the put options. All right. So I buy a put, I sell a put; it's it's a it's a cheaper way to do it. So I used to do that, right? And and I don't do that anymore. So for the last probably the last seven, eight years, I no longer hedge my portfolio. I no longer uh do that because I found it's not worth it. It's not worth it.
Right? And I'll tell you why. So I give you an example of 2020. Okay? So in 2020, uh, when the market was coming down, okay, and I saw that the moving averages were sloping down, I thought, okay, it's it's going to go down. So I bought a lot of put options, and the market crashed, and my puts made a lot of money, right? So a lot of money I made on puts. Um, but then the problem is you don't you don't know how long it's going to last, right? Okay. So my puts made a lot of money, but my stocks I was holding had a lot of unrealized losses obviously. So when it dropped, I was I was buying shares and holding my put options. Okay. And then market suddenly reversed up very fast.
Yeah. Okay. And then uh all my all my gains on the puts disappeared. Oh, so you did not realize the hedges? No, I didn't, because how would you know it's, you know, how would you know it's not going to go? You won't know, right? It's like boom, right? So so all all the profits of my puts disappeared. Okay. Okay. I made a bit. All right. But it's like it was a lot, and it disappeared. So in the end, I didn't make any money on my hedging. Okay. But I made a lot of money on my stocks which I bought. Yeah. And of of course, at the same time, I was also selling puts to collect premium. So I made on that, and the same thing happened in 2018, which was the the first trade war, and 2019, which was the uh the Fed uh taper tantrum, and then and it happened so many many times, right? So I realized that at the end of the day, every time I shorted the market, I hedged, I hedged it, you know, and I add up all my profits; it it was so little that it was not worth it, that it made me feel good in the short term because when the market dropped, I felt good.
Yeah. Right. Protected. I felt protected. I felt good. But in the long run, I felt that I didn't really make money from it. When the market eventually recovered, I see that it was not worth the effort. And in my early days as a trader, I used to do a lot of pairs trading. So I long one, I short one, I long one, I short one. I did both. Every time I long a stock, I'll short a stock. Right. And then I look at my portfolio at the end of the year. I found that 90% of all my profits came from my longs and very little came from my shorts, and it was some years where I lost money on my shorts, and it reduced the profits of my longs. I say, what's the point? So that's when I said, so nowadays I hardly short. Okay. Sometimes, like I said, it looks so tempting to short, and every time I'm going to do it, I'll slap myself, Adam, remember what happened first, right? And then I watched an interview by Stanley Druckenmiller a few months ago, and Stanley Druckenmiller, as you know, is one of the best traders in the world; he used to work with Soros hedge fund, and he said, and I quote, he said in the last 40 years of trading, if I add up all my short trades, I'm afraid to look at it. I probably did not make any money from it. And he said, "Shorting is a lot of fun. I still do it, but I know I'm not gonna make any money from it." And I said to myself, if if Steady Druckenmiller can't make money from shorting in 40 years now, I don't feel so bad.
Right. Yeah. But if you think why, it's because shorting, whenever you short a stock or short the market, the odds are against you. If you look at the last 70, 80 years in the market, right? 78% of all years was bullish. 78%, 22% are bearish. So if you think about it, every time you short the market, your odds of making money is 22%. Every time you long the market, your odds of making money are 78%. So think about it; it's like think about you, you let's say you go to a casino, you see a roulette table, okay, and you see 78 uh black and 22 red. Where would you bet? Black or red? 78 black, 22 red. 78. You you bet on the black, right? Of course. Yeah. So whenever you short, you're betting on the red.
I see. Yeah. Yeah. Once in a while, you're going to get a red, right? But over the long run, you know, the law of large numbers, you're going to lose money betting on red. Yeah. Yeah. I guess what you're referring to is markets designed to go up. To go up. Yeah. Okay. Yeah. Yeah. I think a lot of traders need to hear that as well because because I I've shorted stocks here and there as well. Shorting is fun. It's fun to be contrarian, you know, and and especially if you find a stock and say it's bloody overvalued. It doesn't make sense, and it's and I tell you like, for example, I remember LinkedIn, right? So I shorted LinkedIn years ago uh when it was very, very new, right? I remember I saw the PE ratio was 100. I said, this is freaking ridiculous. It's, you know, it's a 100p. I shorted it. It went to 400p. Okay. But thank God I had a stop loss, right? So I I was stopped out. I entered I So I was stopped like three times, and then I said, "Okay, that's it. I give up."
Okay. All right. So were you shorting with um were you buying the puts? Were you actual shorting the I was shorting the I was shorting the underlying but with a stop loss. Right. I see. And the interesting thing is that if you uh listen to Warren Buffett's uh talks, he mentioned that in his early days, he used to love shorting. Oh, he he did a lot of shorting. In fact, he used to irritate his teachers. And this was a story, you can watch it on YouTube, right? That because he knew a lot of teachers at that time were buying AT&T. Uh a lot of AT&T, right? And just to irritate his teachers, he would short AT&T and go to the school to show them his short position.
Oh, wow. Okay. And so actually Buffett started shorting, right? And he realized again, over the long run, that even if he found a company that he knew was crap, he knew was overvalued, and and you short that doesn't mean you're going to make money because sometimes a crap company that's overpriced can still go up because in a short term is is based on optimism and and euphoria, right? And yeah, so it so I don't know if you've heard Stanley Druckenmiller's famous story. What happened in 1998? What happened? Uh, was it 98, 99? Right. So at a time, you know, the com boom, a lot of uh tech stocks that were not making money, they were they were going up like crazy, overvalued. So Druckenmiller says this is ridiculous. They are bound to collapse. So in 1999, he shorted I think eight tech stocks. Uh, and after he shorted it, it kept going up. Which eight? I I he didn't mention, right? Okay. Okay. And his short position was initially 100, uh, if I'm not wrong, was 100 million. Uh, his his his position, right? Eventually, it kept going up. He couldn't take it anymore.
Oh my god. And he closed it for 600 million loss. Okay. 600 million loss. And the day he closed it was a day before the top of the bubble. Okay. And one day later, the bubble, it collapsed, and all those six stocks he shorted all went to zero. But it was too late. He was stopped out at $600 million loss. Yeah. Right. So you can be right on a lousy company, but you can still lose everything because you know, in in shorting, you have to be right on the timing. Yeah. But when you go long, you don't need to be around the timing, right? Because if you're a long-term investor, you know, you can afford to wait. Eventually, it's going to come up.
Yeah. Yeah. And it's good to know that as a as an investor who's long on the stock, the most you could lose is, you know, everything goes to zero. 100, right? 100%, which is 1x. But if you're right, like my Palanteer, like my Nvidia, I'm up 10x. I'm up 11x. So you just need to be up 11x, 10x on one good stock like Nvidia, Palanteer to cover many that that didn't work out, right? But when you're shorting, you know, your your loss is unlimited, right? Yeah. If you don't put a stop. Yeah. So the the odds are just against you. Yeah. Yeah. But it's just so tempting. It's just so tempting. Yeah. It's very tempting.
Um, so let's go back to investing for a little bit. Um, I recall that you said you're both a value and a growth investor. Yeah. So generally speaking, you know, people either value invest like the like Warren Buffett, or you're investing in growth like the tech stocks. So these two are generally known as quite different. So how do you kind of use pole principles from both approach and to build your own current portfolio for long-term investments? Okay. So first of all, this this uh uh this categorization of growth versus value is full of nonsense. It is total nonsense. And this comes from Buffett himself. In fact, someone asked Buffett once uh between value and growth. He says it's total nonsense. He says it's total nonsense. Right? Because okay, first of all, what is value? Value, see, a lot of people think that when you buy a value stock, low PE, okay, and um that that's rubbish. Okay. So for example, let me give you an example, right? When I bought Nvidia uh in October uh 2022, um I bought it at $15 per share. This after the share split price. Okay. That time before the share split was 150. Okay. So I bought at 150 uh at the time, and my intrinsic value was uh 220. My valuation was 220. Okay. Now, so to me, it was undervalued, but to a lot of traditional value investors, they say, "Oh, it's not under, it's overvalued," right? Because the the the PE ratio was I think uh I think 40 times or 50 times, right? But PE is a very misleading way of valuing a stock because PE ratio, price to earnings, doesn't take into account the growth of the earnings. Okay? And it doesn't take into account free cash flow. Right. I see. So the the proper way to value a stock is to take the present value of the future cash flow. Okay. So that's primarily how I value uh these kind of stocks. All right. Um, so to me, Nvidia was undervalued. Okay. And is it a growth stock? Yeah. All right. So I buy companies that are again have huge growth potential and are undervalued. Right. And PE is totally meaningless in that equation.
Oh, right. So when people talk about value stocks, they normally talk about cyclical stocks, low PE, cyclical stocks. Those are stocks I never touch. I never touch cyclical stocks. So like oil and gas, I never touch oil and gas. I never touch um commodities. I never touch uh shipping. I never touch real estate. I never touch. Yeah. Uh, because these are very cyclical industries that are highly competitive. Profit margins are very low, and uh yeah, I don't touch those, right? So I touch uh mainly health care, uh consumer discretionary, uh technology and communication services, and certain parts of financials because they tend to have higher return on capital, uh they've got pricing power, higher profit margins, uh and uh
We call it economic mode, strong competitive advantage. So, before you buy a stock or you're eyeing some investments that you're looking to add to your portfolio, what are some—what's your process like for stock selection, and what are some of the key criteria you look for when, um, valuing a company?
Okay, so there are primarily seven things I look at, and I divide them into three parts. So, the first part would be to ask myself this question: Is it a great business? Okay, number one, is it a great business? And the second part would be, okay, it's a great business, but is it a great price to buy? And number three is it an optimal entry point?
So, for the first, uh, part, which is, is it a great business, I look at a few things. Number one, I look at at least the last 5 to 10 years of the track record of the business. So, I want to see the business having a very consistent growth in revenue, okay, uh, profits, and cash flow from operations for at least 5 to 10 years. So, the reason I want to do that is, especially, I want to see in the last recession, in the last crisis, did they still grow their revenue? Did they still grow their profits? Did they still grow their cash flow? Because if they did, that means the business is resilient, the business is predictable, and the business is consistent. So, I only buy companies that have that consistency, and I would say that in the whole market, less than 5% of companies can pass that first step, less than 5%, less than 5%. Right? Because most companies in a recession, in a crisis, revenue drop, profits drop. Right? So, I want companies that know revenue goes up, profit goes up even in a crisis. Right? So that's that's the first step.
Then the second thing I look at is I want to make sure that the company has got what we call a sustainable competitive advantage that protects it from competition. So, competitors cannot easily take away their market share. Competitors cannot easily take away their customers. And so they have got what we call pricing power; they are able to raise prices every year without losing market share. Okay. So, uh, and to do that, they must have a few things. Okay. So, they must, for example, have a very strong brand that people are willing to pay more for the brand. Uh, they must have high customer switching costs, uh, where once customers use the product, it's hard to switch to another product. Like Apple's a good example. Apple has this ecosystem, right? Once you use your iPhone, your Mac, your Apple Watch, you're in an iCloud; it's it's not so easy to switch to another device because then it doesn't sync to your iPhone, right? Or like cybersecurity companies or like software companies like your ServiceNow, your your your Salesforce—once corporations use these software, integrate into their workflow, they can't switch that easily, right? So, they lock in customers. Uh, or a network effect, for example, uh, in in in Asia, we all use WhatsApp; you can't live without WhatsApp, you know, uh, you know, you got to use Facebook in Asia, uh, in the US more of Instagram, right? So, if I'm not wrong, I think, uh, yeah, close to 4 billion people use one of Meta's products, right? That's that's almost half the world's population if you think about it, right? So, that's called the network effect, you know, you know, the more people that use it, the more people want to use it because everyone's using it, right? If you, if you sell stuff, you got to be on Amazon, right? So, this creates a mode for the business, you know. So, I I look for companies with a mode, you know?
Um, so a good example of why like I didn't invest in Zoom or I didn't invest in Beyond Meat or I didn't invest in in PayPal, uh, even though they look cheap at one point of time, because I felt that these companies, yeah, they could grow, yeah, they look cheap, but I don't think their mode is very strong; in other words, they could easily be disrupted by a bigger player. So, once I feel that a company could be disrupted by a bigger player, once I feel that they don't have the pricing power, I I wouldn't dare to buy it. So, to me, that's a very important criteria, the the mode of the company. All right.
And then the third thing is they must be in some kind of secular growth, uh, industry. So, for example, I invest a lot in healthcare because I think healthcare is a strong secular growth, um, semiconductor, cybersecurity. So, there must be some kind of growth catalyst. Uh, then fourth, I look at management efficiency. How well does the management run the business? So, I look at ratios like return on invested capital, return on equity, uh, accounts receivables versus revenue, uh, to make sure that they manage their working capital well.
Then the next thing I look at is debt. So, if you look at a lot of companies that go bust, whether is it Lehman Brothers, Silicon Valley Bank, what they all have in common, highly leveraged, a lot of debt, right? So, I tend to, uh, avoid companies with a lot of debt. So, if you look at certain industries, oil and gas—not all, but many of the oil and gas, airlines, autos, uh, shipping, real estate—they all have very high debt. So, I tend to avoid those industries. I I I go for companies with a lot of cash on their balance sheet, very low debt, so that in the worst crisis, in the worst recession, they won't go down, right? In fact, they'll become stronger because they buy up their competition. All right? So, once a company can pass these steps, I know it's a great business.
Then is it at a good price? Because a great business can be a bad investment if you overpay for it. Yeah. Then you do a valuation. So, the next step is then I value the stock, and there are many methods of valuation depending on the type of business. So, for example, if it's a bank, I use what we—I use the price-to-book ratio to value it. If it's an insurance company, I use a discounted net income. If it's, um, certain type of tech company, I use discounted cash flow. So, the yeah, so once it's a good business, it's undervalued, then I'm ready to buy. Then I look at the charts. Ah, technicals at the very end. Then I look at technicals. Okay, is it on an uptrend? Is it on a downtrend? Is it consolidation? And then if it's on an uptrend, then I wait for retracement to a strong support level. If it's on a downtrend, I wait for signs of a reversal, like a double bottom, like a strong parabolic drop to a strong support.
So you just mentioned all the different steps you use to look at whether a company's a potential buy. What if the stock just never gets to the point, the the areas of technical support that you're looking at? What if you just never find an entry even though it's been on your watch list for a long time?
Then I don't buy. That's the discipline. That's the discipline. So, I see I have watched stocks in my watch list for months and even years and not touched it. That is the discipline. I see. That's the discipline. Yeah.
Could you share some of the stocks you have on your watch list?
Yeah. So, there's one that I've been eyeing to buy, but is but hasn't gotten cheap enough, uh, which is, um, um, Copart, ticker symbol CPRT, Copart. So, they are they are an online, uh, business where they buy and sell, um, used auto parts. You know, when people scrap their cars, they want to sell the scrap metal. Yeah. Yeah. I wasn't familiar with this. Okay. Interesting. So, it's a great business. It's a damn good business, but it's never cheap. It keeps going up, right? And in fact, uh, last, uh, what you call it? Yeah. During during the the trade war, it dropped and it went very near the intrinsic value, and before I could buy it, the it it reversed back up. I was like, yeah. So, it's one of those white whales I'm watching. Right. I see. I see. Another one is Tyler Technologies, which is a software company. So, as you know, you've heard of Salesforce and Adobe and ServiceNow. So, they're all software-as-a-service companies. So, Tyler Technology is a software company, but they specialize, um, in, uh, providing software to the federal government for court management. So, you know, like the court, the court, the judge and all that, they need software to run the the the courts. Oh, right. And so this company, very niche. So, this company only specializes in providing software to run the court management, and it's a great business, right? But I can't get it. It's too expensive. Won't come down. Won't come down. Right. Um, there's no tariff risk in that. Yeah. Yeah. Yeah. Yeah. Um, what's another one? Yeah. It'll come to my mind, but but few of these. There are a few of these, right? Okay. Yeah.
Could you share some of your biggest winners and your biggest losers in terms of your investments?
Okay. So, uh, Palantir so far has, uh, more than 10x, right, uh, Nvidia also more than 10x; those are the more recent ones. The what did you see in—sorry, what did what did you see in Palantir, just curious? Uh, it was a very unique software solution, uh, at a time, um, again, it's something that's very hard to explain off the cuff, but I I did a lot of deep dive on understanding the business, the uniqueness of how they were able to use AI. And again, this was before ChatGPT came out, right? Okay. And by the way, I bought Palantir at 11 bucks. It dropped to five bucks after I bought it. It was down 50%. Uh, and then this was again before ChatGPT, right? But I held on to it because I I I believe in the uniqueness of its software offering that no one offered a similar kind of software, right? So, at that time, they only doing it more for the government clients, okay, for the military, and then it was starting to go into commercials and, um, but I only dared to buy it when they started becoming profitable. I was watching it. I said I want it to become profitable first. So, only when it delivered its first quarter of profits then I I got in. Oh, so you you actually did try to time it quite well, $11. No, it wasn't it wasn't a good timing, right? I bought it, dropped 50% after I bought it, right? So, it wasn't a good timing. Same thing. It's gone up what? 600. No, more than that, right? It went up to 140. Oh, yeah. Are you still in Palantir? I'm still there. Oh, even despite—No, but I did sell half. I I I took half off, uh, for profits. So, I'm on the other half. Yeah. So, these are some pretty big winners, uh, Palantir, Nvidia, what are some of your biggest losses or losers from your investments in the past?
Uh, okay. So, in terms of percentage loss, I would say my biggest one would be, uh, REIT, real estate investment trust listed in Singapore. Uh, it's called Manulife REIT, and basically they they invest in US office properties, and the problem with REITs is that they are highly leveraged. Okay. Uh, and what happened was during COVID, uh, as you know, people were all work from home. So, many of these REITs, uh, they couldn't lease out their office space. They couldn't they couldn't earn their income, right, their commercial property, and and a lot of the commercial property in the US, the the valuation dropped, right? And because highly leveraged, so it's down 90%. Okay. So, biggest percentage loss, 90%. I'm still holding it, by the way, because it's so damn cheap. I said no point selling it, uh, you know, but the good thing is that it's it's it's less than 1% of my portfolio. And so now, after dropping 90%, it's like 0.1% of my dividend port. No point selling it, right? They're still distributing dividends. No, they they paused their dividends, but they're going to start paying again, I think, next year or something like that. Okay. Yeah. But I I think now I think it's going to come back, but it's not going to come back to where I bought it. No way. Right. But I'm sure I can get a bit more compared to what it's selling for because I, if I'm not wrong, it's selling, uh, I haven't seen it for quite a while, but I think it's selling something like 80% below the book value, something like that. Oh, okay. Yeah. So, I have no point. You know what I'm saying? Yeah. So, that was the biggest percentage loss. Uh, besides that, let me see what else. Um, the other big percentage loss was I think Estée Lauder. Yeah, I I cut loss at I think I I was down like 50 or 60%. Okay. From my entry price. Um, yeah, those are my two biggest ones. The rest were like, you know, down 20%, down 30%. I I cut loss on those. Uh, but the good thing is that they all made up less than 1% of my portfolio. So, I guess my qu—next next question is, besides the REITs company you're still holding, how do you decide when to cut your losses? It's like what has to happen to the stock or the company that you see that you decide, hey, it's time to get out.
Yeah. So, so as you know, trading and investing is very different. For trading, once we enter, we've got a stop loss. Here's a stop, we get out. Right. So, for trading, you get out purely based on the price action. For investing, I get out if I feel that the business has no more hope. Yeah. There's no more hope. Right. That's it. Okay. It's not that. Okay. It's not that there's no more hope. Right. Okay. But I would I would sell—I I would cut loss if a few things: number one, if I feel that they have lost their competitive advantage. Uh, that means they are their economic mode has eroded. So, it's no—it's no longer a great business. Uh, so a good example, uh, so there could be a few reasons. Number one could be management really screwed it up, or number two, there was a huge disruption to their business model. So, Disney is a good example. Disney. Disney. Oh, okay. So, Disney, in the old days, they they made a lot of money from their linear TV networks. That's where they made a lot of money from, and their parks obviously. Right now, the Disney parks are still doing very well. But the linear networks, uh, TV, basically, was disrupted by Netflix, by all the streaming. So, that's gone, right? So, Disney, this, uh, realized that they have to go into streaming. So, Disney Plus to make up for the loss in the linear networks TV. But so far, so far their Disney Plus, uh, has not been doing as well as they they projected. Right. That's true. Uh, and it's it's getting very competitive. You've got Amazon Prime, you've got Netflix, and all that. So, that looks like—you don't think things will get better after they bring back, um, Bob Iger. Yeah. So, I mean, he has been back for a while, and and I, you know, so far I have not seen any material change in that, right? And of course, Disney has gone way too woke. All right. I mean, what, you know, I mean, look at their bloody Snow White. I mean, yeah. So, I I I think the brand is totally—and and to me, you know, I love Star Wars. I was the greatest Star Wars fan until they took over Star Wars and they totally messed up my childhood. They destroyed my my Star Wars with their crap woke stuff on. Now it's personal. Yeah, now it's personal, right? No, no, but but seriously, no. No, but yeah. No, but the the decision to exit was not personal. I said that's it. I I'm gone. Right. So, Disney is one of them. And, um, Estée Lauder, I think what really messed them up was, uh, they pivoted to such an extent that 50%, almost 50% of their business is from China. Oh, yeah. And then when the COVID hit, when the lockdown hit and now the trade war, you know, they they could get it back, it's going to take a very long time. I see. Right. So, if I feel that if I can sell and take whatever's left and reinvest in something else that could make my money back faster, that has got more predictable cash flow, stronger mode, I'll just switch it up. Yeah. What? So, we are talking, we talked about the losses, the the stuff that you're looking to cut. Yeah. Yeah. That was my question: how, when to get out of the losing position. What about taking profit on winners?
Uh, this is in for traders, I guess, trade. When you're trading, you look at daily resistance. You look at when the chart went parabolic, you get out. But what about for investing? When do investors—when should they decide to take profit on their winners?
Yeah. So, when I first started in investing, I would take profit using a lot of price action as well. Okay. So, the moment a stock was above my intrinsic value and it was overvalued and I saw that it went a bit parabolic, I would sell, and then I say, okay, let's wait for it to drop, undervalued, and I buy it back. So, that's what I used to do in the old days, right, uh, and looking back, it was really very stupid. Yeah, it was more of a trader mindset, uh, because I made I made good money, right? Uh, but when I look back, I realize that if I—and and many times what would happen is that, you know, the stock would go up and I thought, okay, it's overvalued, it's not going to go higher, it's like overbought, overvalued, and I sold it, and after I sold it, it kept going up. Yeah. Okay. Right. It kept going up, going up, going up, going up, going up, and then I said it won't drop. So, I tell myself I'll buy it when it drops, but by the time it drops, it's still way higher than when I sold it. Yeah. and it's again not undervalued enough, and then I lose out, and it goes off without me. Then there are other instances where, okay, the stock goes up, it's overvalued, overbought, I sell it, and once I sell it, drops, and I feel very smart, yeah, I'm so smart, right? But now the problem is when do I buy it back, you know? So, you're waiting to buy it back, say, okay, I'm going to buy it back when it gets to the support, and before it hits the support, it flies back up again, that yeah. So, when I look back in the last 20 years, u you know, I bought Ma in the early days, I bought Visa when it IPOed. Okay. I bought Microsoft. I bought many of these great companies in the early days, and I did this. I I jumped out. I jumped in. I jumped out. I see. And I realized that if I just held on to these stocks for the last 20 years, today I'll probably be five to 10 times richer. And so that was another epiphany. So, from there, I realized that once I once I I'm into a great company, I never sell it. Okay, I never sell it as long as it's still great. Okay, so even if it's overvalued, like like Palantir is overvalued, right? By the way, my intrinsic value for Palantir with my most optimistic growth rates is $35. Oh, wow. Okay. It's 110. Okay. And Okay. So, I did sell half to to to take some off the table, but the other half I'm not selling even though it's way overvalued. So, to me, as long as the business is is still growing, as long as there is still a long runway, as long as, um, it's not—Yeah. As long as if if I still think that there's a lot of room to run, I'll still hold it.
So, let's talk about the market we're in today. Uh, as you know, there's a lot of fear in the market so far this year, especially after after March or so. Um, and recently, there's been some optimism. I watched in some of your YouTube videos that you mentioned that despite all those, you know, volatility, trade wars, you know, who knows what's going to happen next week. You still don't think we would enter recession this year. Why? Why is that?
Um, okay. First of all, I have I have no idea whether we will enter recession because it really depends on how long these tariffs will stay. True. Okay. I wish—we don't know, unless you're sleeping with Trump at night and you can hear him talking in his sleep, that there's no way to know, right? So, if they if they take off the tariffs, if they reduce the tariffs, then fine and dandy, you know, but if he keeps the tariffs there and remains there, of course, you're going to get into recession, you know, but but who who knows, right? But the thing to understand is that how do you know it's a recession? When the NBER, the National Bureau of Economic Research, declares it's—
A recession, then you know it's a recession, right? Okay.
Now, if you look historically, by the time they declare a recession, guess what? It's usually the end. It's the o it's over. Yeah. So, there's no value in knowing when it's a recession because by the time it's confirmed, it is over. And if you look at again past recessions, by the time they they declare the recession is here, the market would already have gone up about 50% from the bottom because as you know the market doesn't reflect what's happening to the economy now. The market reflects what is happening in the future. The market is always future pricing, right? The market is is a leading indicator. So the whole thing is that again the first thing I always say is don't bother timing the market unless of course you're a trader, right? But as an investor, don't bother timing the market.
I see, but if if you want to time the market, don't bother looking at macroeconomic data because it is always too late. If you want to time the market, look at price action. It's as simple as that. Look at price action.
So you you're saying even for investors they should look at price action. If you want to time the market, which I'm suggesting you don't time the market, but if you do want to time the market, you look at price action because price action leads economic data. And yeah, so so again um so if you look at price action, you ask yourself this question, you know, are are we are we on a downtrend? Okay. Yeah, we are on a downtrend because the 50 has crossed below the 150 moving average. Um although I don't think it's sloping down yet. I have to double check. I think it started sloping down, but I think the 200 day has not sloped down yet. I'm not sure. I I I have to check that. Right. We'll double check. Yeah.
But having said that, even though you see that the moving averages have crossover sloping down, but when price drops very rapidly, that's not a good time to to sell or to short because yeah. After a sharp drop, you usually have a very sharp rebound.
I see. Right. So if you look at again 2020, same thing. If you by the time the moving average crossed and you shorted or sold, you would have sold at the bottom. Yeah. Same same thing happened in 20 uh 2018, 2019 if I'm not wrong, 2011 as well. These were all very sharp drops. So in fact, in my last YouTube video I showed all the previous examples when the market dropped very rapidly. A lot of times you had a very sharp rebound after that.
So you don't think this time's different? It's always different, right? But but no matter what, remember that, you know, crisis never lasts forever. Corrections never last forever. Eventually, it's going to get resolved. And this one is a purely artificially induced crisis. So was 2022. 2022 was artificially induced by the Fed, right? Fed raised rates aggressively. 2020 was artificially induced because of the global lockdown. This is artificially induced. So it is not a normal economic cycle bare market. So a normal economic cycle bare market is not artificially induced. It's because of the normal boom and bust cycle of the economy. That is what happened in 08-09 and all the previous recessions. The last three were artificially induced. That's why if you look at history, if you look at the last 100 years, you notice that a bare market recession on average happens every six years. On average, every six years, right? But we had a bare market in 2020, 2022, and possibly one now, which not yet, right? If it does happen, you that's three bare markets in 5 years, right? Okay. Yeah. It has never happened in history. Okay. Maybe it has in the Great Depression. I don't know, right? But it's artificially induced which I like because when something is artificially induced, once they uninduce it you're back up like co once they you know they they they open the borders, you got a vaccine, once uh J power stop raising rates you're back up.
I see. So that's the good thing about it. Oh yeah. I think a lot of people need to hear this. What what do you say to the to the people who the investors who unfortunately bought let's say Nvidia at I forgot what what was the peak you know one one was it 14 was it 180 I think sorry 140 is all-time highs, what do you say to investors who bought Nvidia at let's say 130 or Palantir at 120, what they still believe in their investments but just unfortunately they timed the top, what how should they approach and what should they do with their investment?
Nothing. Just hold on to it. Just buy it. Once you're in a great business, even even if you overpaid for it, hold on to it. You know why? Because over time, the intrinsic value would rise and catch up to the price you paid.
I think uh those are really really sound tips and very rational tips. Yeah. I mean, you got to think rationally and not emotionally. And by the way, Palantir's is now I think it's back to almost 110 already.
Yeah. Yeah. Yeah. It recovered fast.
Yeah. I also hear this a lot even among my trader friends. A lot of people are calling for the market to go lower, especially if the tariffs persist and they go they don't get eened up and they're waiting for the market to go lower to get in to the market for investment. What what what are your suggestions for these people trying to time the market in order to get in?
Confucius say, investor who try to pick bottom always end up with smelly finger. You never knows where's the bottom, right? Yeah. Okay. You never know where the bottom, right? So, I mean, yeah, you you can't, right? So, if you keep having that mindset that I'll get a lower price, you'll never get in, right? And I remember there was this there's this chart which I showed to my students. I showed it on YouTube a few times where if you look at at the last 10 or 20 years, um, if you just do if you just do dollar cost averaging or you could time the market perfectly, whatever you do, you will make money. The only time you don't make money is if you don't even get in, right? So, so the thing to remember is that is that in the short term, uh, the stock market is more risky than holding cash. Okay? In the short term, the stock market is more risky than holding cash because in the short term, you never know where the market's going to go. Market can drop 20, 30%. No one knows. So, I tell people that if you need the cash for something in the next one year or two years, don't invest in the stock market, keep it in cash. All right? But if you don't need the money in the short term and it's and you want to build your wealth, your retirement funds in the next 10 to 20 years, then the longer you hold stocks, the safer it becomes. The longer you hold cash, the more risky it becomes because in the long run, your cash is going to lose value from uh uh inflation, right? But stocks are going to go higher over time. So it depends on your time frame, right? And I don't know whether you saw my last video where I I showed this interesting chart that in the last if I'm not wrong last 50 or 70 years uh every time the VIX goes above 60 and the VIX has only gone above 60 I think only five times in the last 70 years right so whenever the VIX goes above uh 60 which is panic right and and then drops below 35 that has always marked the bottom. Or when it spikes and it settles and that's usually it drops below 35. 35 is the magic number, right? And and I showed it in my last YouTube video. Okay. And I said now is the same thing that happened. VIX went above 60 and dropped below 35. In fact, VIX dropped below 30 uh last week. Okay. So, well based on that pattern based on historical patterns. Oh, but again, no 100% right. Depends on what Trump does when he wakes up later on.
Oh, okay. Just out of curiosity because I'm more of a trader and a lot of our audience members are traders as well. Yeah. Um trading and investing like how much time are you actually watching the market as a as an investor? How often do you watch the market? Daily, weekly?
You don't actually have to watch the market at all. Uh so I mean when it comes to investing um you just have to glance at it less than 5 minutes a day. Okay. And what are you glancing at? So basically you're you're glancing at first of all the stocks in your portfolio. All right. And what I'm basically looking at is I'm just looking is there an opportunity to add more. All right. So is the price below the intrinsic value? Is the price at a support level? If it is, I can add more up to my full allocation because once I buy a full allocation, I don't add more. And then I'm looking at my watch list. So watch list are stocks that I would like to buy, I've not bought yet. And again, I'm watching is it undervalued? Is it below the intrinsic value? That that's it. So less than five minutes where I take a bit more time maybe another 15 minutes would be the options.
I see. So for that again I'm looking at uh different watch list and I'm looking at whether there's a trade there to to get in for an options trade. And again that's for income. That's not for investments. For income. I see. Yeah.
So you just mentioned that um yeah you always have your watches of potential stocks that you want to buy. So that means you hold a certain percentage of cash. How much percentage of your portfolio do you hold in cash at the moment and is it higher or lower than normal?
Um okay so what I do is is a bit different right? So okay so every year I always allocate a certain amount of cash to put into my portfolio. Right. So I always tell my students that the way to build wealth is spend less than you earn. Okay? So every year you have got savings to put into your portfolio, right? So that's what I do every year. And so at the start of every year I have a rough idea how much I'm going to save and put into the portfolio. And what happens is do I end up using all my cash depends on the market. So because for every stock that I want to buy or I own, I always have about four buy levels where I will average in. All right.
I see. So let's say last year, last year the market hardly dropped very much. It was more or less going up and very small drops. So last year out of the amount I wanted to invest, I only invested 20%. Of what I wanted to buy? Yeah, because the the stocks I wanted to buy, they just didn't get cheap enough, you know.
I see. But this year we have got a bigger correction and more of my stocks are undervalued. So, so far I have uh bought I've used up about roughly about 60% of my plan allocation this year.
Oh, already? Even though we're into was it April only? Yeah, I' I've used up 60%. So, I've got another 40% to deploy.
I see. Uh yeah. So, that's how I look at it. Right. And you said you plan four levels for a particular stock. That means if the stock goes lower, you might hit all four levels, but if it doesn't, you might just get correct. Yeah. Two. Yeah. So for example, there are some stocks that I really love. Um and but because they only hit level one. Okay. So so roughly I every time it hits a level, I buy one quarter of my intended allocation. Okay. So there are some stocks that only hit the first level and then they flew up. So I could only have one quarter allocation. So one stock, for example, is MCI. Okay. You know, the financial stock that does all these ratings, MSCI. Yeah. So I love that company, but I could only buy like a quarter.
I see. because it didn't get cheap enough. Oh, and then so I've got cash on standby to buy the other three quarters if it gets there. If it doesn't get there, then my cash is waiting, right? But the cash which is waiting, I make sure that that that cash is producing something. So I buy into I put into some uh bond ETFs for some of them and then some of them the cash I use to as as as collateral to sell puts. So I'm earning premium to get income on that cash. So the cash is at least doing something while waiting.
Oh, so no matter what whether it's invested or not, the cash is generating at least some percentage. That's right. Yeah. Okay. It's good to hear. Um any final thoughts for the traders and investors watching this? Any final tips you have for them?
Okay. I would say that whether you are investing or trading um pay little or no attention to the macro. You know I think a lot of people they get influenced by macro stuff. You know what is the Fed doing? The yield curve, the interest rate, the inflation, the GDP. And to me all this is noise. All this is noise. Now is macro important to the market? Yes, of course it is, right? Macro can move the markets, but the problem is that it's important, but it is unknowable. In other words, there's no way to predict what the Fed will do. There's no way to predict what Trump will do. So, there's no point focusing on something that you can't control. That's something that you have that you can't predict, right? So, it's best to ignore all that noise because all that noise will tend to interfere with your investment and trading decisions. So when it comes to trading, my decision to enter and exit is purely based on the price action. If I get the right price action, if I get the right candlestick pattern, the right support, the right what I enter, regardless of what Trump is saying or what the Fed is doing, it's purely based on price action. Same reason to cut loss. So investing is the same thing. My decision to buy and sell is purely based on the fundamentals. Is it a great business? Is it undervalued? Is it a support level? If it is, I get in. I don't care what the news is saying today and tomorrow. That to me is the most important thing. And so all this news is again if you want to read it purely for entertainment. Ah never to influence your decisions.
Those are very some some uh very good tips. Thank you so much Adam. Thank you for your time. Right. Thank you for having me. Okay.
So, after that conversation with Adam Coup today, do you feel a little bit less anxious about the stock market and hopefully less triggered to hit that sell button on your portfolio? Remember, big money and millions of dollars are made when stocks are going down, not when it's going up to the moon. If you have any more questions about investing and trading, feel free to ask Adam in the comment section below. And if you want to learn more from other millionaire traders and investors, then you can check out the playlist over here.