so happy New Year everyone and welcome

to 2023 this is my first video for the

new year so we leave 2022 behind and I

think that for most investors we are

pretty happy to leave that year behind

um I'm not excluded from that list so

after getting pretty good returns for

many many years 47 in 2019 44 written in

2020 23 written in 2021 well 2022 I

ended with a negative result I was down

30 for 2022. now the S P 500 that

measures the broad index ended the year

down 19 so being down 30 I

underperformed the S P 500 however I

slightly outperformed the NASDAQ which

was down 33 although that's no

consolation so one of the reasons why I

underperformed the SNP in 2022 is

because if you take a look at the

breakdown of the different sectors this

is year to date for 2022 you can see

that the sectors that dropped the most

were communication Services down 40 this

would include alphabet uh Disney a TNT

and Netflix for example second worst hit

was 37 down consumer psychical stocks or

consummate discretionary stocks like

Nike Amazon Mercado Libre booking.com

for example and the third worst hit was

technology down 34 like Microsoft and

Salesforce

and service now for example and real

estate down 29 so if you take a look at

my Investment Portfolio most of my

stocks are concentrated into technology

as well as consumer cyclicals as well as

communication services so because most

of my stocks are in these three

categories yep that's why they had a big

drop for 2022. so I think for most

investors unless you were heavily

invested into energy stocks chances are

you had it down year as well now many

people would ask Adam so why did you

have most of your stocks Within These

categories right most of mine stocks

besides technology consumer cyclicals

and communication I'm also heavily

invested into Healthcare as well but

that was down like 9.9 not too much so

that kind of like buffered my portfolio

I'm also heavily invested into Financial

stocks which are which was down 13 now I

do not have any exposure to energy

stocks never have never will and that's

a reason why I I underperformed the S P

500 this year because it was the energy

sector that boosted up the s p to only

drop 19 versus the NASDAQ that has no

energy stocks that drop like 33 so the

reason is because as an investor I only

want to invest in companies and sectors

that outperform over the longer term and

you can see from this chart over here

that in the longer term in three five

ten years the sectors that tend to

outperform the market

are technology consumer cyclical or

discretionary as it's known as as well

healthcare because these are the sectors

with the highest operating margins and

with the highest growth rates and so

that's where my portfolio is

concentrated so that's why I know that

in the long run I always beat the s p

but in the short run I may sometimes

underperform if these seven sectors sell

off like they did in 2022. now if you

look at energy for example Yes Energy

did very well in 2022 but it's a very

short-term game it's like a one hit

wonder because energy companies if you

look at the long run they tend to

underperform you can see the energy

sector in the long run tends to weigh

under perform the S P 500 because energy

stocks tend to have lower operating

margins they have got weaker economic

modes lower return on invested capital

and lower growth rate so again from

investment perspective that's why I

don't invest in energy but I do trade it

in my short-term portfolio

now do bear in mind that

my U.S Investment Portfolio is down 30

but my Singapore stock portfolio

um is actually down a lot less although

it's still down right yeah uh this is my

Singapore stock portfolio where I invest

mainly in dividend companies like the

Singapore Banks and REITs you can see

that in the last one year

uh is down uh 6.34 percent okay so the

Singapore stock portfolio was a lot less

volatile in 2022 the US one was more

volatile and of course this doesn't

include my options trading uh portfolio

you know that is up like 22 for 2022 but

because I only allocate a small amount

to options trading and a big amount to

Investments that's why overall I'm still

down for 2022. so if your Investment

Portfolio is down for 2022 don't feel

too bad about it I'm right there with

you right now especially for those of

you who are new to investing when you

see your portfolio down it may feel uh

scary it may feel frustrating it may

feel confusing and a lot of you would

probably look at your portfolio and ask

what could I have done differently uh

how could I have avoided this drawdown

in my portfolio yeah and what are the

lessons I can learn what are the

mistakes I made so I don't repeat the

same mistakes so being someone who has

been investing for quite a number of

years and going through many bear

markets in the past going through

drawdowns before I thought I'll share

with you how I deal psychologically with

drawdowns and how I analyze my portfolio

to discover what mistakes I may have

made and how I could have done better

now many people say that 2022 was a

really bad year for investing now to me

it really depends was it a bad day or

good year see there's no meaning in life

except the meaning you choose to give to

it and depend it depends on your

perspective so 2022 was a bad year if

you were a net seller of stocks if you

were forced to sell stocks because you

needed the cash to do something else or

because you were high on margin and the

broker forced you to sell stocks then it

was a bad year you had to lock in really

bad losses but if you are a net buyer of

stocks and your intention is to slowly

invest into the markets over the next

three to five years or ten years to

build your retirement your Investment

Portfolio for Financial Freedom then if

you think about it 2022 was a good year

why was it a good year because great

companies were marked down 30 40 50 it

gave you the chance with the same dollar

investment to buy more shares of great

companies for your portfolio so if you

think about it because of the lower

prices in 2022 and you consistently

invested through dollar cost averaging

this will result in higher returns in

the next three five ten years give you

an even bigger retirement portfolio so

to me if you ask me I say that 2022 was

a bearish year it was a year that my

portfolio was down but it was not a bad

year it was a good year because I was a

net buyer of stock so you got to think a

bit differently

now the first thing to understand is

that when people ask hey how could I

have avoided uh this drawdown right the

drop in my portfolio I've got news for

you

drawdowns are inevitable I don't care

how good an investor you are even the

best investors in the world cannot avoid

drawdowns now think about it Peter Lynch

who's known as one of the greatest

legendary fund managers that for 13

years

um he gained 604 return on his fandom

the Magellan fund right and versus the S

P 500 that made 223 so he beat the s p

by three times and his annual return for

13 years was 29 he turned 20 million

dollars to 14 billion dollars one of the

legendary investors now when people look

at that they think that hey that means

that he's up every single year that

means that his portfolio grows at 29

every single year but in reality that

doesn't actually happen if you look at

his

uh performance in purple this is the

Magellan fun of Peter Lynch versus the S

P 500 that's right that over time he

beats the s p by by three times right

but look at the drawdowns that there are

times where the market goes down his his

fund will go down even more than the

market like when the market went down

over here back in

1981-82 his fund dropped 56 56 drawdown

when the market dropped over here he was

down 27 when the market dropped here in

87 he dropped 42 when a market dropped

over here back in 1990 his fund dropped

32 so every time the market dropped he

would drop more than the market why

because as value investors we think we

tend to buy companies that are

undervalued that are that are unlived

that are hated and sometimes when we buy

it may go lower in the short term

so if you want to beat the market in the

long run sometimes in the short term you

may underperform the market and it's

just the nature of investing so don't

feel bad that in the short term why am I

down more than the index hey even Peter

Lynch went down more than the index in

the short term but in the long run you

will beat the index if you focus on

holding the highest quality companies

companies with the highest return on

Capital the strongest economic modes

companies with the highest operating

margins and these are the companies that

I invest in that I teach my students to

invest in so remember drawdowns are

inevitable it's kind of like where you

take a plane no matter how good a pilot

you are you can't avoid turbulence you

will have turbulence and just remember

that the stock market is like a roller

coaster you only get hurt if you jump

off the right halfway if you stay in the

right you will always Reach the the

destination which is your final

financial goals right

now the question is why are drawdowns

inevitable you know why can't I avoid my

portfolio going down in a certain year

the reason is because it is impossible

to predict with certainty when the

market will crash it's impossible to

predict when the next bear Market will

come and when it comes how long will it

last how low will it go no one can

predict with certainty and the reason is

because we can't predict the news we

can't predict tomorrow's news and how

the market will react to the news like

for example in 2021

there's no way you could have predicted

that in 2022 there'll be a war in

Ukraine no one could have predicted it

except put it right and in 2021 there's

no way to predict that inflation will go

to the highest clip in 40 years and that

a Federal Reserve will the Federal

Reserve will have to raise interest

rates at the highest height 18-4 high in

40 years no one could have predicted it

even the FED in fact if you go back to

September 2021 the fomc meeting the

Federal Reserve chairman himself he said

that inflation is transitory inflation

will come down in 2023 and he said we do

not intend to increase interest rates in

2022 and he said this in September the

FED chairman so think about it if the

chairman of the Federal Reserve cannot

predict inflation in six months if he

can't predict interest rates himself in

three months

how can you how can I it is impossible

all right so don't beat yourself up

saying oh I should have predicted it no

there's no way you could have predicted

it now some people say about Adam

in 2021 they were experts they were

Financial gurus who predicted that

there'll be a crash in 2022 we should

have listened to them

yeah right now remember that every

single year for the last 10 20 years

Financial experts and gurus the same

bunch of people the same uh doomsday

porn actors

they say the Market's gonna crash every

single year

so again if you take a look at this

chart right this is the last 13 years

so in 2021 there were many people

predicting a crash yet their work okay

and you can see for example New York

Times 31st December they said the feds

move in 2022 could end the stock

market's pandemic run you say oh I

should have listened to them if I listen

to them I saw I would have avoided this

20 30 drop yes but if you listen to them

then you would have listened to all

these other predictions for the last 13

years now check it out every single year

they say the Market's gonna crash

like back in 2022 over here some

investors are making the biggest bet

against the market in nine years

a lot of people were shot at that point

of time but the market went up and they

got killed on their shots right after

the covet crash

just in April it says stock search is a

bear Market rally that will collapse

CNBC Market went up didn't collapse so

if you listen to that and you would have

missed this huge rally I didn't listen

to them so I made a lot of money during

the rally at 47 right over here

June 2019 are you prepared for stock

market crash Why markets are still

heading for a crash right every single

year they predict a crash you know and

of course a broken clock is right twice

a day eventually of course the market

will crash statistically there'll be a

bear Market once every six years but you

don't know exactly which year it will

appear and we know that statistically uh

the markets go up 70 of the time right

in 100 years 70 years the market will go

up 30 years the market will go down it

is a fact there will be ups and downs

but there'll be more UPS than Downs so

if you stay invested you will always

build your portfolio you always build

your wealth but the trouble is you never

know when the down years will come and

when the updates will come

all right and if you think about it if

you are someone who listens to these

predictions say oh I should have

listened to that prediction you would

never have invested in the last 13 years

or even 20 years or even the last 30

years because there's always a crash

prediction every single year

and if you stay out of the market in the

last 13 years and you just held cash you

would have gotten zero return

if you put all your money in bonds and

just get interest you would have gotten

25 return in 13 years but if you

invested in the U.S stock market and

ignore all these crash calls you can see

that even with the crash in 2022 you'll

still be up 500 percent

so that's why the most important lesson

to take away is this

time in the markets is more important

than trying to time the markets I've

heard some people say recently that oh I

should have listened to Robert Kiyosaki

because he predicted the crash in 2022

and he said buy Bitcoin right the stock

markets will crash but if you look at

all his Tweets in the last 13 years

guess what he predicted that the market

that the market will crash eight times

in the last 12 years right over there

right Mark is going to crash Market's

gonna crash every freaking two years he

says the market is going to crash and if

you listen to this guy you would have

missed out over close to 500 returns on

your Investment Portfolio and God bless

you if you bought Bitcoin because it's

collapsed and in my opinion if you hold

it in a long run it's gonna go worthless

because it's a non-productive asset it's

a completely worthless piece of [ __ ]

okay in my opinion again you don't have

to listen to me but that's my opinion

now having said that

it's still important that as an investor

you got to become a better investor

every single year and to become a better

investor you have to take responsibility

for your results don't blame anyone

don't give excuses don't blame fat share

power don't blame Putin don't always an

[ __ ] right okay but don't blame

anyone but take responsibility and learn

from your mistakes so what I do every

year when I review my portfolio whether

it's up or down I ask myself what

mistakes did I make and how can I do

better the next time and that's how it

become a better investor

the first key to learning from your

mistakes as an investor is recognizing

when you make a mistake and when you

didn't make the mistake so let me give

you four scenarios

of when

after you buy a stock the price drops

okay there are four scenarios now

scenario number one is

you invest in a stock of a fundamentally

great business

so you did all your research it passes

all your criteria it's a great company

High return on Capital white economic

more great growth potential great profit

margins great company and you bought it

when it was undervalued you got a great

margin of safety but after bought it the

price dropped even more she became even

cheaper because of Market volatility

whatever right the war or higher

interest rates stuff like that now

so if this happens to you you bought a

good company that's undervalued and

nothing has changed the business is

still great the business is still

growing but the stock price dropped even

more became even cheaper now question is

this a mistake that you made yes or no

the answer is no it's not a mistake why

because you followed your investment

plan you bought a great company you

followed all the rules you bought it

when it's undervalued right

and here's the thing

there's no way you can predict where the

market price will go in the short term

and you have no control over where the

market price will go and remember that

in the short term

the market price can have nothing to do

with the fundamentals of the business

the business can be a great company can

be making more and more money but the

share price can drop purely because of

panic selling or emotional reasons and

that again is not within your control is

something that you cannot predict

so in this scenario it is not a mistake

so just because you bought a stock and

the price went down doesn't mean it's a

mistake all right because it's a great

company so in this example what's the

right thing to do the right thing to do

is to hold on to your stock because it's

a great company and take it as an

opportunity to add even more shares to

buy more of the great company at lower

prices to average your cost down

so take it as the market Mr Market is

giving you a gift

of getting more shares at a cheaper

price

so that's the first scenario

now so examples of this scenario so I

have bought great companies that are

doing really well but the price still

went down like Visa

the price still went down although a bit

right master cut the price still went

down McDonald's the price still went

down a Thermo Fisher the price still

went out so these are companies where

the price went down in 2022 but to me

it's not a mistake right I post it went

down but Apple's doing great so I'm

buying more of these companies okay

second scenario is that

um you analyze a company it's a great

company and

you calculated the intrinsic value and

you bought it when you thought it's

undervalued but then after that

you realize that your initial valuation

was too optimistic it was the the

intrinsic value was higher than what

what it should be because maybe you were

too optimistic about the growth rates

and all that right however it's still a

great business

but you overpaid for it slightly not too

much but slightly overpaid for it so in

this example uh is it a mistake

the answer is yes it is a mistake so

have I made mistakes like these yes I

have so one example now that I reflect

back on my investments in 2022 2021

I bought a stock called Viva take a

symbol v-e-e-v and to me it's a great

company

it's a a dominant technology company in

the healthcare sector it's growing it's

a great company

but when I valued it about two years ago

I was a bit too optimistic and I

thought it was very cheap at the time I

bought shares but now the price has

dropped about uh 30 okay so now I look

back I think that I overpaid for it

slightly that it was not that cheap

actually I kind of like paid a slightly

higher price and now it's gone below my

purchase price so in this case it is a

mistake I made so learning from that

mistake I'll be more conservative in my

valuation in the future so what should I

do for this stock

should I sell whole or buy more and the

answer is I'm buying more why because

it's a great company so even though I

overpaid for it slightly but it's a

great company the valuation will grow

into the price I paid so in other words

I will still make money

but you'll take a bit longer because I

can't like overpaid slightly does it

make sense all right so that's the

second scenario now the third scenario

is that

you invest in a great company

uh that meets all your criteria and it's

undervalued but after you bought it

there were some short-term problems that

occurred some short-term headwinds like

for example there could be a cyclical

downturn in the industry or they decided

to increase their r d expenses so their

profit drop or they were faced the

lawsuit or something some [ __ ] happened

right that you didn't foresee and the

stock price dropped okay so in this case

but but all these short-term hit wins

are short term

right they will resolve themselves but

their economic mode remains strong the

company is still a great company is it

is still dominant and the growth

prospects are still intact

so are there companies that I have that

meet this criteria yes example Amazon

so I invested a lot in Amazon I invested

a lot in meta I invested in Salesforce I

invested in Alibaba in 10 cent and yes

these stocks I bought they've dropped

more since I bought them and they are

down like about 20 30 below my purchase

price

so

to me are these mistakes

I bought Amazon I bought Mets I bought

Alibaba it dropped after I bought it

because of short-term headwinds like

government regulations or because of

high r d costs matter going to the

metaverse to me it is not a mistake

so why don't I regard this as a mistake

because when I invested in it there's no

way I could have predicted

that

for example when I invested in Alibaba

in tencent I had no way to predict that

there'll be a pandemic

there's no way I could have predicted

that China will go into a zero covet

policy that there'll be all these Tech

regulations I there's no way I could

have predicted it all right

same thing when I invested into you know

Amazon and meta uh there's no way I

predicted that they would jack up their

r d course to strengthen their mode that

caused their share price to go down so

to me it's not a mistake

um and that's why I'm still holding

these companies and in fact I'm adding

more shares because these companies

their modes remain strong their modes

are getting stronger and these

short-term hit wins will resolve right

because in fact now like matter and

Amazon they're starting to cut costs

because they over hired in the pandemic

they're cutting costs they're reducing

the r d budgets in China zero covet is

ending so once these short-term problems

resolve then there are profits their

free cash flow will easily double in

triple and the share price will easily

double triple and quadruple from current

level so I am buying more of these

companies so that is the third scenario

okay

so like Peter Lynch said often there's

no correlation between the success of

accomplished operations and the success

of its stock over a few months or a few

years

all right but in the long term in three

five ten years

that's a hundred percent correlation

between the success of a company and the

success of a stock

if the business does well the stock will

do well very simple so do I believe that

Amazon will do very well in the future

meta Salesforce yes why because they

dominate their industry and they got

very little or insignificant competition

same with Microsoft for example right so

this disparity is the key to making

money it pays to be patient and to only

own successful companies time is the

friend of the great business but time is

the enemy of the lousy business all

right so scenario number four

this scenario is when you invest in a

business it meets all the criteria you

bought it when it's undervalued but

after you invested in it the

fundamentals of the business change

permanently

the business

economic mode or their competitive

Advantage is loss has deteriorated and

it's not coming back because of all

kinds of reasons for example could be a

change in consumer Behavior for example

let's say you bought uh you know beyond

meat for example and people suddenly

said I don't like all these fake fake uh

fake meat right and then you're screwed

okay or for example a change in some

government regulations that totally

changes the business model forever and

it's not coming back or technological

disruptions to the business like for

example if you own Nokia

and one iPhone and blackberry and and

whatever it is they came up with all

these new phones it made Nokia obsolete

so that's when the business changes

permanently

so has this happened to any of my stocks

this year yes one of them called menu

life

read so this is a US office read that I

invested in

uh before the pandemic it's an office

read in the US that owns Office

Buildings and their rental offices now

the trouble is that

the pandemic hit which I I didn't

predict to be a pandemic right so

because of that office occupancy rates

drop and now after the pandemic people

are still not returning to the office

they want to work from home or remote

work and because of that this read their

occupancy rate has dropped a lot their

income has dropped a lot and the

business has changed permanently so is

this a mistake I made

yes it's a mistake although I could

never have predicted the pandemic I

could not have predicted that people

want to keep working from home but it is

a mistake so for this particular stock

what's the right thing to do that you

know that the future is going to be

tough is to sell you have to exit the

position and reinvest in a better

company once you realize that the

business is no longer great do not

stumble stubbornly hold on to a losing

business it doesn't make sense it's an

opportunity cost to hold on to it so

that's why I've been divesting and

selling off uh that particular read all

right so that was a mistake right the

fifth scenario is the worst now this is

an unforgivable mistake

all right so this is a mistake where you

invested in a lousy business you

invested a company that is not making

money that has lousy economics that has

got you know is is a lousy business okay

and it does not meet your investment

plan

you know so you may say Adam if it's a

lousy company doesn't meet my plan why

do people invest in it most people do

because most people they don't have an

investment plan they don't have an

investment criteria they don't do their

research they just buy a stock because

it's hot because it was recommended on

Reddit or because

um they heard a rumor about it or

because they fore mode everyone is

buying it they are buying it and they

end up buying crap okay so that's the

worst mistake to make when you realize

that the stocks you bought are lousy

companies they are not making money they

they may never make money okay they were

all hyped up they are just hyped up

stocks like like AMC or like

like you know whatever right all that

all those lousy crap companies okay or

it could be that you made a mistake in

your initial research when you did your

research you said oh [ __ ] I made a

mistake it's not a good business so this

is the kind of mistake where

you've got to get out immediately right

sell the position at a loss or whatever

it is take the money and reinvest in a

business that will make you that money

back okay so for those of you who are

new to investing you may make mistake

number five it's a very common mistake

for newbies where they end up buying

lousy companies okay because they didn't

do their research but once you have

invested for many many years with

experience like me okay I don't make

mistake number five anymore right but I

do make the other mistakes once in a

while and that's how you learn it from

it so I do hope that this video has been

useful to you to share with you that

yeah no matter how good an investor you

are now or you'll be in the future you

will go through turbulence you will go

through drawdowns is inevitable you know

right but focus on what you can control

which is following your investment plan

remember as long as you followed your

investment plan to buy good companies

and to sell lousy companies you have

done your job you are a good investor

don't Focus or be stressed out

on things that you can't control you

can't control the news you can't control

the fat you can't control where the

market goes in the short term so don't

be stressed about that focus on holding

good companies and you'll be well

rewarded over time I'll see you guys in

the next video if you want to catch my

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cool and may the markets be with you