Last Friday, got an invitation from a friend (Let\'s call him, Alex) to meet up for drinks at our favourite joint at 5th floor, Havelock Road. By the time I got there for Happy Hour, the fellow is almost drunk, having downed a bottle of Gordon Bleu. \"What\'s with the ocassion?\" I asked. \"Bro, this is my last visit to this place. I will be broke come Monday and it is going to take me years to rebuild what I have now.\" \"I lost more than a million in the stock market. Had to sell off my house, my car to repay the margin losses.\" Alex sobbed. I was stunned. For a man, who is known to be conservative in his investing approach, I would never have believe that he would leverage up to invest. Over the drinks, I understand more about the situation. The poor chap made some money with COSCO and SGX in 2006/2007. In fact, too much money and that made him feel that he is invincible. Gradually, he ploughed more money into the stock market. Not satisfied with the financial constraints that he faced, he margined his shares to a local broking house and got more money to invest. The S-chips became his favourite. The likes of Ferro, Jiutian, COSCO, China Sky, China New Town. If the share price goes up, he buys more to catch the upside. If the share price goes down, he averages down. There is no end to this buying. :woohoo: :woohoo:
To make things worse, his stock broker actually increased his trading limits without checking his financials. From under S$100,000, his trading limit ballooned to S$1,000,000. For a novice, who has only invested in unit trusts prior to 2006, this gave him the invincible feeling. \"I did my homework. I read all the annual reports, research reports from broking houses. They all said the companies\' fundamentals are great. Should trade at 10x PE, dividend yields are attractive. But why did the share prices continue to fall?? \" Alex remarked.
This all came to an end last week when the Singapore stock market suffered massive losses 3 days in a row. FerroChina slumped from $1.00 to 80 cents. COSCO fell from $2.30 to $1.87. MIDAS dropped from 58 cents to 42.5 cents.
actually, whether it\'s $1m or $10,000, the suffering is great if the $ lost is huge compared to one\'s net worth. i think people like Peter Lim the remisier king has lost hundreds of million because his portfolio also tanked, butthe fellow has billions. anyone knows of friends who have suffered a lot?
market is very fickle now, even long-short full-time fund mgrs also kena caught. :dry: how much more vulnerable the long-only retail player with a short holding period in the current fiercely bearish environment...
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