Adam Khoo Piranha Profits (review and notes)

Here's my concise notes after learning about the Stock Market Basics, Exchange Traded Funds & Steps to Profitable Investing from Adam Khoo's Wealth Academy Course.

Keys to profitable investing

What to buy
How much to buy
When to buy

Helpful websites are available for each section of my notes.

Stocks in the HK market: AA stocks

Stocks in the US market: Finviz

Helpful indicators for Facebook Stock (Data is shown for 9th Sep 2021)

Earnings per share

EPS or profit per share = (Income or profit or Net income)/shares
10x P/E means share price is trading at 10x the earnings
P/E dun take into account growth rate of earnings
Interpretion of P/E (12X) = earnings growth rate (12% growth per year)

PEG ratio

PEG ratio takes earnings growth rate into account
PEG ratio = P/E ratio/earnings growth rate
Earnings growth rate: EPS next 5Y
PEG ratio>1: overvalued
PEG ratio<1: undervalued
PEG 1-1.6: still reasonable to invest in

Common indexes in US market

The Dow Jones Index (30 largest companies)
The S&P 500 Index (500 largest companies)
The Nasdaq Composite Index (average of all stocks listed on the Nasdaq stock exchange)

Useful facts

Stock markets are in bull mode 91% of the time, with impulse and correction patterns
Corrections: buying opportunities, with temporary dips of 5 - 15% and last ~1- 2 months
Bear markets come every 6-8 years, last ~ 6 months - 1.5 years
Stock prices drop an average of 36% (50% in a severe bear market)

Type of ETFs

Market Index
Sector/industry
Bond
Foreign currency
Commodity
Inverse
Leveraged

Market index ETFs

SPY: S&P 500 Index ETF
DIA: Dow Jones ETF
QQQ: Nasdaq100 ETF
GXC: S&P China ETF
EWG: iShares MSCI Germany ETF
ASHR: DBX Shanghai A Share ETF
Hang Seng technology ETF: 3033 ETF
BKF: ETF covering Brazil, Russia, India and China
EEM: Emerging Markets ETF

To find ETF for a specific country, in the case of China - here is the link

ETF Information: State street SPDR (Global Advisors)

Sector/Industry ETF

Information about Sector ETF: Sectorspdr

Healthcare (XLV)
Materials (XLB)
Energy (XLE)
Financials (XLF)
Industrials (XLI)
Technology (XLK)
Utilities (XLU)
Consumer Staples (XLP)
Consumer Discretionary (XLY)
Communications (XLC)
Real estate (XLRE)

Types of Sector

Healthcare
Financials
Energy
Consumer
Technology
Industrial

Industries with growth potential

AI (BOTZ)
Cybersecurity (HACK)
Robotics (ROBO)
Cloud Computing (SKYY)
Clean Energy (ICLN)
Solar Energy (TAN)
Disruptive Technologies (ARKK)

What to take note before buying an ETF

Fund size (AUM)
Reputable fund maangement companies
Number & % allocation of each company
Diversification of companies
Expense ratio
Average volume (>100K shares traded per day)
Past performance

Types of Bond ETFs

Treasury Bonds (TLT, IEI)
Emerging Market Bonds (EMB, JNK)
Corporate Bonds (LQD, VCSH)

Types of inverse ETFs

It is designed to perform opposite of the underlying index. They are used to "short" the index. it's used during bear market as it goes up while market goes down.

Short Dow Jones (DOG)
Short S&P 500 (SH)
Short Nasdaq-100 (PSQ)
Double Short S&P 500 (SDS)
Double Short Financials (SKF)
Double Short Bonds (TBT)

Commodity ETFs

Used to invest in physical commodities, such as agricultural goods, natural resources and precious metals. It can be focused on either a single commodity or track the performance of a commodity index. Commodity prices are driven by demand and supply (geopolitical events) and the strength of the US dollar.

Gold (GLD)
Tracks light sweet crude (USO)
Sugar ETN (SGG)
Commodity (DBC)
Silver (SLV)

ETF Portfolio Allocation (Equity only)

Ticker	Name	Allocation
SPY	SPDR S&P 500 ETF Trust	25%
QQQ	Invesco QQQ Trust	25%
GXC	SPDR S&P China ETF	15%
ASHR	Xtrackers Harvest CSI 300 China A ETF	15%
VNQ	Vanguard Real Estate ETF	10%
EEM	iShares MSCI Emerging Markets ETF	10%

ETF Portfolio Allocation (Multi-Asset)

This is also known as the All Weather Portfolio, invented by Ray Dalio. AWP is a passive, buy and hold strategy designed to perform well under all market conditions. It achieves moderate returns with minimal volatility.

Entry strategy: dollar cost averaging and rebalance portfolio annually

Ticker	Name	Allocation
SPY	SPDR S&P 500 ETF Trust (Stock)	30%
TLT	iShares 20+ year Treasury Bond ETF (Long term bonds)	40%
GLD or IAU	SPDR Gold Shares (Gold)	7.5%
DBC	Invesco DB Commodity Tracking (Commodities)	7.5%
IEI	iShares 3-7 year Treasury Bond ETF (Intermediate bonds)	15%

To test the returns of various portfolios: Portfolio Visualizer

Steps to successful investing

Identify very good businesses
- Increase in value overtime (higher sales, earnings and cash flow from operations)
- Economic Moat
- Brand Monopoly
- High Barriers to Entry
- High Switching Costs
- Network Effect
- Conservative Debt

2. Invest when the stock is undervalued

3. Sell when fundamentals deteriorate or when stock is overvalued

When does a stock trade below its value

Investors have negative perception of company
Error that affects short term profitability only
Bear market
Industry recession
War/disasters

When to buy or sell

Investment strategies recommended

1) Dollar cost average for buy and hold stocks

Invest a fixed dollar amount at regular intervals

2) Trend following

Identify trends using moving averages and price action
Buy when the index starts an uptrend or is making a dip on the uptrend
Sell when the index reverses into a downtrend

3) Hybrid approach

Only dollar cost average when price is making a dip on an uptrend or when prce is at the support level of a consolidation
Avoid DCA when price is on a downtrend trend

General principle: buy when there is a reversal or trend signal

Buy when the price is at the dip of an uptrend, at the support level of a consolidation, buy at the dip where it bounce off MA support or reversing into new uptrend
As the share price increase, wait for retracement and buy at the support level
Avoid buying at the highs of uptrend (far from moving average)
Avoid buying shares on a downtrend, as the low can go lower