The issue on the losses incurred by investors recently is still being discussed rather furiously. It baffles me.
Investors in general are financially-prudent. The put in money into financial instruments in the hope of making more money so that they may use the money for old age or to sustain their lifestyle. All is well and good… that is, till they lose money in them.
The contention that is hotly-debated now is whether the investors have been misled or were not given the full picture of the possible financial disasters that might befall them.
I find a group of these investors (not all of them!) hypocritical!
I applaud the investors who admit that it’s their own fault for taking up the risk, knowing very well that they may lose all their money. They invested, taking in both the pros and cons that investment may bring. They admit responsiblity on the chouces that they have made.
However, I am suprememly pissed at the savvy youths (yeah, I have a soft-spot for the elderly) who joined the “I have been misled” bandwagon and have the audacity to demand that DBS compensate them 100%! Are you kidding me. YOU, yes, the one I just described above, are a coward!
One invests knowing that he may or may not get additional money from the investment. He further acknowledges that he may lose his money. So, when the CRO says,”You may lose your money, but the risk is very low. This is a safe product to invest in.” what he means is “You my lose money!” How unclear is that? But, they will continue along the lines of,”But the CRO has downplayed the risk that was involved.” BS! He did not downplay the risk – he did mention that you may lose your money. So what if he had emphasised the risk that it is low – you can still lose money. Even if the risk is o.1%, you STILL CAN LOSE MONEY, ALL OF THEM – how difficult is it to comprehend?
The problem is, people make financial decisions based on either fear or greed (most of the time, greed). Thus, when one makes the decision to invest, he knows the risk, but is optimistic that he won’t be so unlucky so as to lose all his money. And so, he happily claims his dividends and returns (Yippee…), till disaster strikes. While still holding on to whatever returns he has already claimed/withdrawn (if he had), he cries foul! That, my friend, is the typical investor.
When I read books on investments, the key point authors bring across is that you stand to gain, but you stand to lose too. So, it’s about minimising risk. 2 points here:
- Successful investors do lose money investing, but they learn and move on.
- You can only minimise risk – not eliminate risk. Even keeping money in your own home has a risk of being stolen on burnt in a fire!
However, these investors who lost money instead blames on everyone else but themselves. Even if they do say that they are to be blame as well, they still wish to be compensated substantially (basically saying that their fault is minimal, if any).
I’m curious why this peculiar behaviour arises. So, I offer a few but the list is not exhaustive:
1. They’ve lost all their savings.
My commments: The financial-prudence that this group demonstrates through investing is negated by stupidity. a) NO ONE invests all their money – you need at least 6-12 months of your monthly income/expenditure in cold hard cash to tide you through the hard times should your investment go southwards; and b) NO ONE invests all their money in 1 instrument – has the phrase “diversify your investments (and thus your risks)” gone obsolete in this day and age?
2. They feel cheated.
My comments: People only hear what they want to hear. When one invest, greed is he motivating factor. So, when the CRO says,”You may lose your money, but the risk is very low. This is a safe product to invest in.” what they here is “…the risk is very low. This is a safe product to invest in.” Selective hearing results in selective memory that ultimately results in one believing that one was misled!
3. They do not want other investors to be cheated.
My comments: BS! Everyone talks about themselves and how they lost, not about others. So, this argument goes down the drain.
4. They were really dumb and were really duped.
My comments: I believe this is more applicable to retired 60-year-olds who can hardly fill up an application form or who are not highly-educated. They are vulnerable. Their position is made worse by the fact that they tend to belong to the very group of people who need the extra cash. As such, even if they were given the slimmest chance to earn more money, they’ll take the risk. So, a 3-5% risk is extremely good odds for them. Yes, for these people, I pity them because they may really have made a mistake. I have to qualify myself – I assume that EVERYONE READS THE T&C AND FINE PRINTS. But these people are usually disadvantaged in that they can’t, and so they hold firmly to what the CRO says. And coupled with the low income that they have and the possibly lower understanding of the risk, they make decisions without much hesitation.
But, if you’re a 30-50 year-old executive or professional who has a job, and actually has enough money to invest, but was just too lazy to read and too greedy to readily agree, then you deserved it!
5. Denial
My comments: 4D has possibly more than 90% chance of losing, yet people still spend money on them. Casino too. But some people actually win big sums. So, when one is presented with an investment opportunity where the risk is minimal, they expect to win too. This losing is something that no investor count on (be realistic: if you think you will lose, you won’t invest in the first place).
Some people may wonder why I have such a grudge and seemigly no mercy for people who have lost their money. The answer is: life’s unfair, so move one with it.
1. They have been told of the risk, and even bolded in the fine prints, yet they CHOOSE to ignore it, and blame external factors for their losses.
2. They stupidly CHOOSE to invest substantial amounts to one instrument rather than diversify.
3. They stupidly CHOOSE to invest ALL their money without even saving any. Yes, more money invested can mean more gains, but it can also mean more losses. Seriously, has no one heard of the phrase “the bigger you are the harder you fall”?
4. They CHOOSE to blame others but themselves, and thus, in the process, do not and will not learn from this incident. And chances are will repeat this in future when the financial situation is rosy again.
5. They CHOOSE to believe that the economy will forever grow and never go in cycle, and that they can NEVER lose money.
6. They CHOOSE to believe whatever the CRO said, lock, stock and barrel. Look, the CRO is there to sell a product offered by his company. He may get a comission should you agree to invest in the product. I don’t blame the CRO – he needs the commission and he is obliged to sell his company’s product (do you tell customers that you think your company’s products suck?!). One must understand that the CRO is not their personal financial planner. They do not sit down with you and discuss you financial goals in its entirety the way a CFP would. Thus, while they may have a vague picture of what kind of investor you are (low-, med- or high-risk taker), they won’t know about the loans you have to pay, the endowment you have for your kids, the cash you have (or lack of). They’re just there to sell a product offered by their company that has told them how good the product is!
So, it’s about choices. These investors chose the above (and others which I might have missed). But when reality smacks them in the face, they can’t handle the truth. They will go through the stages of grief:
Denial – It’s not possible. How can I lose all my money? It can’t be me. It’s not fair!
Anger – It’s DBS’s fault. The CRO misled me. The government better do something or else. All banks are out to cheat me. #@$&
Bargaining – Ok, fine. If you can’t give me everything, just give me something. Or at least punish DBS. Or something. Just something to appease me… Something…
Depression – Sigh. The government don’t hear our plight. DBS is using its muscle to ignore us and shove us aside. We can’t do anything.
Acceptance – Hmm… I doubt they will get to this stage. They will never accept anything less than what they want!
They will never be satisfied till something happens. And, mind you, it’s not for the purpose of the greater good, but for the selfish reason. Yes, you have kids to send to school and mouths to feed, but you should learn from your mistake. Your children should know what grievous error you made and they should vow to be better than you. Don’t be a coward and run away from a lesson – face up to it.
Why should the government have to use the taxpayers’ money to bail you out? Why should DBS lose revenue from having to pay you back, making DBS shareholders lose capital and dividend gains?
You took the risk, now you feel the consequences of the chouces that you make. Don’t shy from investing – just be a better investor next time…