Read? Understanding Stock Market Risks - Financial Fraud Risk is real! (3)
Honesty???
We will never know someone is honest or not until until his/her death; then only we can say this man or woman is truly honest. (or at least they were not publicly caught for dishonest acts if any during their life time).
Createwealth8888 is an honest person till the time of writing this post as he has not been caught red-handed publicly for cheating on several occasions.
Financial Fraud Risk is Real
Like honesty, we cannot assume that there is no financial fraud risk in our invested companies. All investment by nature are risky and financial fraud risk is real. This risk can never be analyzed by anyone and not even by world-class analysts or board members. So it is wise for us to protect ourselves against this risk through good portfolio management.
Crisis at Olympus
Read that headline news: GIC's exposure to Olympus 'minimimal'. Investment firm says almost all of its stake in troubled Japanese company disposed of; not known if any losses incurred.
Olympus is a 92-year-old company and Japanese are still leaders in camera technology, and Olympus is one of the top manufacturers in Japanese.
When the top management has intentionally hide all these losses, and no one will be able find them, not even their board members if the top management has carefully hidden them.
Createwealth8888's Risk Management
I don't have big balls to build up to more than 10% of my total capital in any one counter and no matter how safe the counter may look like e.g. SPH, SGX, SMRT, etc those that can't fail in Singapore context. I saluted those can put more than 50% of their capital into one counter. They really have big balls or they don't think that financial fraud risk is real.
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8 hours ago
Hi,
ReplyDeleteThat's one of the main reason i don't like to invest in "Established Markets". The more established the bigger the surprise(FRAUD)they can pulled off.(Comparing China, it's frauds are still chicken and novice in standard). Like Enron, Worldcom, and lately Lehman Brothers and many big banks, insurance companies, etc....
That's why i always believe once you invest your money in the market(no matter who you are) you need God's blessings or Luck-depending on your beliefs. For some, of course they still believe in themselves and nothing else.
Shalom.
Hi CW
ReplyDeleteThere is no absolute safe haven for investment. Unfortunately, we have to put our money somewhere. I think having 10% limit on individual counter is a form of risk management as mutual funds adopt similar risk practices but ultimately, one still has to take some risk to achieve more returns than the paltry 0.05-0.10% returns on our savings deposits.
I would think of markets as a "temporary" repository of wealth and am influenced by Nicholas Nassim Taleb on his views about where one should park one's net worth in a world full of black swans :-)
Be well and prosper.
dear cw,
ReplyDeleteas a financial planner, i have always emphasized that wealth management begins with the first 'w' for wealth protection planning.
in other words, insuring against what one cannot afford to lose is the most fundamental basis of investing.
in terms of risks, there will always be the element of uncertainty in any from of investment including financial fraud which u have rightly pointed out but i take assurance in the fact that our government has implemented the ppf (policyowners protection fund) this year which gives a specified level of protection to every policyowner in the event that an insurer goes bust.
therefore, i deem an insurance policy underwritten and issued in singapore as an investment that is as safe as it gets.
my 2 cents' worth.