The Testosterone Index?!

I read with great interest an article in the Straits Times yesterday that linked the amount of testosterone in the body and the rise in the stock market. I managed to find the same article in the internet here.

In the article, it mentions that traders performed better when they had higher morning levels of testosterone. This finding intrigued me. The two researchers involved found that “when traders did well and made money, they didn’t do it solely through cleverness and cerebral dexterity.” You mean the years of experience of a trader doesn’t really matter? Does it mean that a newbie with higher morning levels of testosterone can whip apart an experienced trader? That’s what the experimental results are suggesting but I cannot quite agree with it. Experience does matter and the sample size of only 17 traders is just not large enough to warrant such a conclusion that more the morning levels of testosterone, the more money traders make.

I agree with something in the article though. When you keep on winning in the market, you get a “winner effect”. This winner effect boosts “confidence and risk appetite, testosterone priming makes that winner more likely to win again, and successive winning can push testosterone to counterproductive levels… The more markets rise, the more confident and risk-seeking traders and investors become. The ultimate outcome is a market of people largely convinced of their own invincibility and ready to take irrational risks confident in the outcome being yet another victory”. This is how bubbles are created. This creation of a bubble and the subsequent bursting creates tons of opportunities for those who are sane enough not to take part in the euphoria.

Now, where’s the testosterone index to replace the Straits Times Index?

Coffee with FFN and Adam Khoo

Adam Khoo is an entrepreneur, a best-selling author and a peak performance trainer. A self-made millionaire by the age of 26, he owns and runs several businesses in education, training, event management and advertising. He is the Executive Chairman and Chief Master Trainer of Adam Khoo Learning Technologies Group Pte Ltd and a director of seven other private companies.

FFN: At what age did you get started in investing?

Adam Khoo (AK): My grandpa used to give me hongbaos in the form stock certificates for Chinese New Year when I was 15 years old. Since then, I have been interested in investing. I invested in stocks back in university days as well. However, I lost money then without proper knowledge.

FFN: How do you choose which stocks to invest in? 

AK: I choose stocks which have a wide moat and is fundamentally sound. I basically follow the value investing strategies of Warren Buffett. I have a certain set of criteria before I invest in a company. Basically, the company must have a history of consistently increasing sales and earnings, wide economic moat, have future catalysts, conservative debt, ROE more than 15% consistently, low capital expenditure, honest and competent management and the stock must be undervalued.

Unlike Warren Buffett who doesn’t look at charts, I look at charts and sell when I see a downtrend and buy back when the trend reverses. I even short the market when there’s  a downtrend. Currently, I’m holding short/inverse ETFs like the Ultra Short S&P 500 (SDS) and the Ultra Short Financials (SKF) which will rise in value as the S&P 500 and Financials ETF (XLF) fall.

FFN: What are the mistakes you have done pertaining to investing and what are the lessons learnt?

AK: Buying stocks without looking at the value and without proper knowledge. This was what I did when I dabbled in stocks back in university days. What goes lower, could go even lower! I have learnt my lesson since then. It was a major lesson for me as an investor.

FFN: What advice would you give for beginners who want to start investing?

AK: Invest in yourself first before investing in stocks. There are lots of books you can read and courses you can attend to learn more. Never invest without the right knowledge.

FFN: What psychology must one have to be a millionaire like you?

AK: In my Wealth Academy course, I teach the 9 habits of a millionaire. They are:

Habit 1 – Always Exceed Expectations

  • Always do more than what people expect of you
  • Once during an interview, Micheal Jordan said this when asked how he became the world’s greatest basketball player, “I expect more from myself than anyone would ever expect from me! When my coach expects me to train 3 times per week, I would train 5 times. When my coach expects me to score 15 points for each game, I would score 36 points! That is why I’m the best in the world”.

Habit 2 – Be Proactive

  • Don’t be reactive – waiting for things to happen. Rather be proactive – make things happen.

Habit 3 – Take 100% Responsibility

  • Don’t blame others when things don’t go your way. Giving excuses, blaming and complaining are not what millionaires do. Millionaires take charge of their life.
Habit 4 – Delayed Gratification
  • Habit of the Poor – spend more than invest
  • Habit of the Rich – invest more than you spend
Habit 5 – Do What You Love
  • Do what you are passionate about and money will flow to you automatically
  • “Unless you do what you love to do, you will never become rich” – Adam Khoo
Habit 6 – Acting With Integrity
  • “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you will do things differently” – Warren Buffett
Habit 7 – Be 100% Committed
  • Be 100% committed to becoming rich. When something is a MUST,you will do whatever it takes to get it!
Habit 8 – The Ability to Turn Failure into Success
  • “Success is the result of good judgment, good judgment is a result of experience, experience is often the result of bad judgment.” – Anthony Robbins
Habit 9 – Respect and Love Money
  • Only when you respect and love something, you will get it. When you respect and love money, money will come to you.

FFN: What is your ultimate goal in life?

AK: I don’t have an ultimate goal in life. I have specific goals in every aspect of my life. For example, I have goals in terms of health, relationship, etc that I work towards achieving.

FFN: A parting shot for the readers…

AK: You make your own luck. Luck = Opportunity + Action. True opportunities come disguised as problems. Opportunity itself is not enough unless you take action. When you take action, you get results. There are only two results when you take action. The results might be in your favour or not in your favour. If it’s in your favour, then excellent. If it’s not in your favour, you need to learn from the episode and re-do it till the results become in your favour.

Enjoy the following 2-part videos on “10 Fatal Mistakes of Investing” made by me: