As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

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Sunday, 25 April 2010

Understanding Stock Market Risks - No 7 Risk

Understanding Stock Market Risks - No 6 Risk

This Great Bear of 2008 taught me there is another risk to think about:

7. Dilution Risk

Even if you only invest in blue chips that are strategically important to Singapore and the government will never allow them to fail. So there is very little risk of complete failure but you are still expose to the dilution risk i.e. your interests in your holding get diluted by these companies injecting more capitals to strengthen up their balance sheets by raising more capitals through private placement or right issues.

Private Placement to Institutions

You either get out or get diluted. If you have decided to hold on; then it may take a long while for your current holding to get even.

Right Issues

Same here. You can choose to get out or exercise your option to prevent your current holding been diluted by subscribing to all your entitled right issues to hold it at higher investment cost.

If you don't, then your interests will take a long while to get even.










5 comments:

  1. Hi Uncle8888,

    Could you combine all the 'risks' into one post or give a common, less generic label? Hehe
    Fun to read them. :)

    ReplyDelete
  2. i think the worst risk is the risk U can never think of or the unknown unknowns.

    Same as in a BLACK SWAN?

    ReplyDelete
    Replies
    1. For any known risks, we can prepare ourselves to mitigate those risks. Unknown risks, we can't really plan on how to prepare and mitigate them. Handle them while they appear. Bo pian!

      Delete
  3. Yes 2008/09, there were many rights issues.

    i overcame my fear but never 100% (only subscribed 50% of DBS) and i didn't know why or how managed to suppressed my Baxxs from shinking.

    i even subscribed for excess rights issues.

    Must be Greed overtaken me.

    Must beware the next time because they say "Overtaker bewares of undertaker" can be possible U know.

    Will i do the same again if it happens again?

    i really don't know now that i going down the mountain.

    If the right issues are renounceable, then may be renounce lol (at least won't be diluted so much and still capital intact).


    ReplyDelete
  4. To me, non-renounceable rights issues are always belong to "suspects" no matter who are the underwriters.

    ReplyDelete

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