If you are a social media user or someone who watches YouTube regularly, you would have probably seen the “call to invest” commercial.
Such advertisements show smart-looking and sophisticated-sounding individuals telling you now is the time to invest in stocks or certain commodities and that they know how to best do that.
They will encourage the viewers to sign up for their seminars to unlock the secrets to instant wealth.
As with everything else in this world, if it is too good to be true, it probably is.
Amateur and professional investors love to study the legendary investor Warren Buffet.
Buffet’s world view has been largely built on the strategic economic changes that emerge over time, an irony in today’s world of instant gratification that demands instantaneous results.
This approach to understanding the world and investment opportunities was again shared by Buffet in Berkshire Hathaway’s annual general meeting recently.
One of Buffet’s comments that drew the most attention was his take on the recent spike in first-time retail investors betting in the stock market.
Over the past year, Buffett said there was “the greatest increase in the number of gamblers” dabbling in the stock market.
“There’s nothing wrong with gambling and they got better odds than they’ve got if they play the state lottery, but … they actually don’t have a lot of good results,” he said.
Buffet even used the word ‘casino’, a reference to John Maynard Keynes’ take on unfettered financial market speculation.
In America, retail brokerages reported a surge in the number of new investors, most of whom are first-timers since the start of the Covid-19 pandemic.
This trend has been attributed partly to stimulus cheques that were sent to Americans to support themselves during the pandemic.
This is similar to taking out money from the Employees’ Provident Fund (EPF) through i-Sinar – using the pandemic as an excuse and betting it on the stock market – except Americans are not using their own savings to do this.
Buffet also shared “very short lessons for perhaps the new investors.” He warned new investors that picking individual stocks is more complicated than just selecting a promising industry.
He illustrated this by saying that the 20 largest companies by market capitalisation in 1989 are no longer in the top 20 today. It is also hard to tell whether the current 20 largest companies will remain in the top 20 in the future.
There will always be lucky or very insightful investors who will make money on short-term stock market speculation. But not everybody should put in their life savings or i-Sinar withdrawals, thinking that such investments are guaranteed, and returns will be instantaneous.
If you see a friend or cousin doing well speculating on the stock market, ask yourself if your financial situation is similar to theirs – because some people can lose RM15,000, become moody for a bit but lose no sleep because they already have financial security, while others lose RM4,000 and have their entire life crumble upon them.
As reflected in the local rock band XPDC’s ‘Apa Nak Dikata’ song, “ukuran baju badan sendiri” – which basically means cut your coat according to your cloth.
This is the personal opinion of the writer and does not necessarily represent the views of Twentytwo13.
