December 05, 2022

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Retail Investors Are Not Lambs To Slaughter, They Have Families Too

Source : Les moutons de Panurge
For many years, our local stock market had subdued retail investors participation. There are many reason why but mainly it has to do with the past financial crises. Whilst writing my book, I did substantial research sifting through past news reports and academic papers. For every cycle between 1987, 1997/98, 2008/09 and 2020, the stock market rally was always precipitated by influx of retail investors pushing it to new highs. However, they are always the last to leave ending up the biggest loser when the market collapse or selloff. This will then cause a period where retail investors participation dwindles to record low before normalising.

This is why brokerage houses or investment bank often focus on institutions / large funds as their key clients. This means they will get good insights from analysts, access to corporate management which help them invest better. Retail investors on the other hand will always be disadvantaged. This caused a vacuum and who fills the void? Fake Gurus

Retail investors influx in 2020 reach levels unseen since the 1993 bull run. Similarly, fake gurus started propping up everywhere. Countless Facebook & Youtube Ads of Fake Gurus flooded my social media. No matter how many times I hide or report ads, just like cockroach, they will find a way to come back. Now imagine, with many new retail investors, this makes them easy target for the Fake Gurus.

Especially in a time of pandemic, where people are locked up at home, businesses are closed, income reduced, job loss, even boredom kicks in. Many invest in stocks hoping to pass time or simply to make ends meet. When those Fake Gurus keep appearing in your screen, showing you his expensive watch, car, house dressed in suit, you start wondering, maybe you should try investing too. With no knowledge in the stock market, your only reliance is the Fake Guru and his "philosophy". You dont even know whether what he is teaching you is real because the Fake Guru gets celebrity endorsements and pictures with VIPs. When you ask question, they brush you off. You end up blindly following.

Sadly, these bunch of flamboyant and ostentatious people are indeed Fake Gurus who know NOTHING about investments, risk management or valuation. They only know simple theories. Needless to say, tragedy strikes when the market is no longer in a bull run like in 2020. These Fake Gurus had no idea about macroeconomics hence they would not know the intricacies of global landscape, politics or social issues which would necessitate retail investors to conserve cash entering 2021. They would also would not know cashflow importance and missed out Serba Dinamik's glaring issue. As of today, KLCI is at 1531 which is 9% down from 2020's peak which is close to a 10% correction.

I have been writing for 7 years now advocating healthy investment mindset sense. Fundamental, long term investing is the only way to do well in the stock market. If you invest in good companies with good management, you will do well over time. The performance is relative to time and it becomes less risky with a longer investment horizon. However, talking about long term investment and fundamental is boring compared to rocketing to the moon.

Why am I writing this? After the FM988 live call suicide incident, I felt very empathetic towards the caller's predicament. What I didn't know was there were in fact so many victims like him out there who have paid RM 15k per person to these bunch of Fake Gurus and lost almost everything they invested in the stock market. The leader of these bunch of Fake Gurus was flagged on SC Investor Alert List since 2019. 

Retail investors are crucial towards the healthy development and vibrancy of Malaysia's stock market. The fact that their record participation in 2020 have filled the void by foreign funds who have been selling our Malaysia stocks for the past 13 consecutive quarters shows how precious they are. If our retail investors are burnt by your actions and never to return to the market, it would lead to a huge void in future just like the Singapore Penny Stock Scandal in 2013.

So, I would like to put this on record, to those Fake Gurus, if you still have conscience and a heart, REFUND every single sen to these poor people. After that, close down your website, social media accounts and do not ever promote yourself as a GURU again. It is not their fault that they were misled by incompetence and misrepresentation. They are not lambs for you to slaughter. They have family too.


Author of "Once Upon A Time In Bursa", please click HERE 

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This  information should not and cannot be construed as or relied on and (for  all intents and purposes) does not constitute financial, investment or  any other form of advice. Any investment involves the taking of  substantial risks, including (but not limited to) complete loss of  capital. Every investor has different strategies, risk tolerances and  time frames. You are advised to perform your own independent checks,  research or study; and you should contact a licensed professional before  making any investment decisions.

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