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Thursday, December 18, 2008

Adam Khoo's Secrets Of Millionaire Investors

There are a lot of books out there on how to become a millionaire, and quite a few on investing as well. Mostly, they’re disappointing. The millionaire books might be inspirational, the good ones anyway, and they may have some advice that’s useful, but in order to actually making them work, you would have to sign up for follow-up seminars and the special, proprietary coaching programs of the authors, all of them expensive.

And about those books on investments – they tend to be disappointing for a different reason: Either they’re too basic and conservative, in the vein of promising you that you too can become a millionaire if you invest 10% of your salary for the next 40 years.

Or they are, once again, too vague. They might provide introductions into some of the basics of certain aspects of stock trading, but if you’d try to actually follow their advice, you’d soon find yourself in hot water.

Not so with Adam Khoo and Conrad Lim’s book, Secrets of Millionaire Investors. Just from looking at the title, I would have probably expected more of the same. But Adam and Conrad actually provide the blueprints – and the details – on how to make investing work.

The book starts with a bang – taking us right into the world of trading stocks, and the challenges Adam faced during his first attempts at making it work. Let’s just say it wasn’t a pretty sight. For two years, he played it safe after that.

But the failures were just stepping stones, prompting Adam to seek out mentors and models from whom he could learn, something he discusses in much detail in some of his other books, for example in Master Your Mind and in Secrets of Self-Made Millionaires.

His key role model: Warren Buffett, arguably the world’s most successful investor. He studied what Buffett had done and quickly saw where he himself had gone wrong. His other investing books were of the sort I mentioned above – providing good but incomplete information, and Adam learned the hard way that a little knowledge, even if it’s good, can be very dangerous.

So he set out to learn everything he needed to know to become a successful investor, and started to apply what he learned. First he focused on Singapore, but he quickly moved on to the U.S. stock market, a much more dynamic marketplace.

But even skilled investing in the stock market only gets you so far. He soon noticed that some of his friends doubled their money in weeks... by buying options.

So he attended seminars and quickly expanded his expertise to options as well.

Next, Adam’s co-author, Conrad Lim, shares his own rags-to-riches story. He decided to learn about the stock market after going through several business failures and a bankruptcy. I actually find that inspiring. It means that even after thorough failure, you have a chance to better yourself, and become wealthy.

On his quest to learn about the stock market, Conrad too suffered the failures caused by good but incomplete information. He quickly learned from his mistakes, though, and slowly, he was making gains. After about a year, he was consistently earning a nice full-time income just from trading stocks, and things went uphill from there. He went from failure to becoming someone people sought out for advice.

Next, the book goes into the meat of investing, starting by dispelling the myths perpetrated by most of the other books, especially the one about the correlation between low risk and low return on one side, and high risk and high return on the other.

A poignant quote by Warren Buffett underlines that point:

“Risk Comes from Not Knowing What You Are Doing”

And that’s the situation the book sets out to remedy. I was amazed at the wealth of detail the book went into – efficiently and clearly explained in its 272 pages. And not just regular stock investing either, but all the fancy stuff, including options and short-selling.

Here’s some of the kind of information covered in this book:

1. Basic principles of how the stock market works, and how to work the stock market successfully, including such gems as how to make sure you get out early if you picked the wrong stock without getting burned too badly.

2. In a chapter, called “The Idiot Proof Way To Making Money” the authors explain the first and most basic system for making money in stocks. They argue that with the information they provide, it’s possible to achieve just about risk-free annual returns. The only “skill” you need is patience.

Have you ever been at those teaser investment seminars, where they tell you about surefire ways to make money in the stock market and show you some fancy charts that they say will tell you exactly when to buy and sell and so on? I have. And then they say that we’d get all the info we need to actually apply this information if we bought into their $5000 or so program.

Reading this chapter brought back those memories because all the charts they showed (and many more) are right here in this book, starting with this chapter. The difference: They’re explained in so much detail that you can actually apply that knowledge. That’s when I really started to pay attention. This was good stuff.

It teaches you how to buy, how to sell, when to buy and sell, and so much more. The “more” is key, of course. If you did just the idiot proof techniques, you could make a nice chunk of change, but it would probably be hard to become really wealthy that way. That’s why the authors added many ways to turbo-charge the process. And, something very important, especially when the economy goes through challenging times – they’ve provided plenty of ways to make money no matter what the economy does.

The next chapter is about Value Investing, Warren Buffett’s secret. But this goes way beyond the kind of information you can buy at a regular bookstore. And one of the key skills you learn in this chapter: How to evaluate a business and the potential of its stock – in great depth! Worksheets are provided.

Next, something really cool: “Momentum Investing.” I must admit that I had never even heard of that before. The idea is that you catch stocks that are about they take off and rise in value so quickly that most other people don’t catch on till they have to buy them at a premium. Many detailed charts and instructions help you to figure out which stocks are good candidates, and how to catch them just before they hit it big.

Of course, what goes up often comes down, either temporarily or, sometimes, permanently. So this chapter also provides detailed strategies on how you can protect yourself from losing what you’ve just earned.

If the book ended here, it would have already surpassed my expectations, as well as most of what you can find elsewhere, and probably most of those $5000 seminars as well.

But it doesn’t end here. It goes on to cover stock options, the real secret to making lots of money in the stock market, and quickly. Of course, you can also lose your shirt, but after learning and carefully applying all the strategies in this offer, that chance is much reduced.

The beauty of stock options, according to Adam and Conrad, is that you can make money with them in any kind of economic climate, that results can come quickly, and that you can leverage whatever funds you have by controlling a much larger amount of money. That is also the key to the risk, which is why options are something to be approached with caution – and knowledge of how they work.

There are a few warnings in this chapter. Don’t try this at home... (unless you know what you’re doing). Yet there are also techniques that are much less risky – and the authors point them out and proceed to explain them so thoroughly, I wanted to stop reading the rest of the book and just have a go at them.

In fact, options are really the heart of this book. They are the key to making significant financial gains in a short amount of time, and so they get a lot of extra coverage. How they work, how to understand the information you need to gather to make informed decisions about them, and how to best go about making money with them.

There’s even a super safe way to make money with options. Yes, you can still lose money but the amount is very limited – and you stand to gain a great deal if your bet pays off. Plus, of course, with the information you have gathered using the other techniques, your bet will always be informed.

Another whole chapter is devoted to the fine art of short selling, a technique that can pay off big during bear markets. You’ve probably read about them in the paper. Well, here’s how to do it, and, of course, with lots and lots of detailed info along with work sheets for help with assessing funds and their performance so your chances at success are maximized.

The last chapter guides you towards putting all this information into action. Once again, it comes with work sheets you can use to assess your risk and the probable movement of the stocks. And advice on how to keep track of your gains and losses so you can tweak your system and make it turn mostly profits.

All in all – it’s an outstanding guide to how to make money in the stock market – with charts and plenty of work sheets where you can track and evaluate the stocks you’re interested in.

It’s a how-to book that really lives up to its name. Just one small disappointment – there were a few places where the authors mention some even more advanced strategies, which are only available to members of their proprietary Wealth Academy program. So there’s still a bit of the old tease.

But on the other hand, the book provides a wealth of actionable information, which is plenty to keep its readers busy for a long time, and, if they apply it diligently, it should quickly pay for Adam’s Wealth Academy program, where they learn to accelerate their income even more.

And come to think of it, there’s always more to learn, and considering the value that this book provides, the fact that Adam and Conrad offer a way to learn even more is actually great news.


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