What a Cleaning Company Taught me About Risk Management !
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What I learnt most from this article is not about the share price of this debt laden developer but the poor cleaning company, Fei Yun Cleaning Coy who has US$3 over million unpaid debts owed by Evergrande, the most talked in town property developer, rumoured to go bankrupt.
With 90% of his business given to Aoyuan property developer, during the good times, he could afford to expand his business and make money. But the failure to diversify his customers base has painfully and regrettably landed him to sell his beloved car and mortgage his apartments in order to keep his business afloat.
Similarly in the good days of the tech craze or now the crypto craze, people are ploughing more money into a single asset, believing the sky is the limit and easy money can be made. While it is true that some has become overnight millionaire or multi millionaire , we must not let these stories influence us too much. Easy come, Easy go, as the saying says.
No one single industry can dominate forever just like the Law of Nature. The winter may be harsh and colder on certain times of the years but it will soon passed and Spring will arrive. This is the Law of Nature, nobody can change it. The stock market operates the same, man can manipulate it by propping it up with ultra to negative interest rates, pumping in more money into the system and all other means but the higher it goes, the harder it will fall.
The question that God knows is WHEN will that day comes. We are now seeing how a single country like China and its strong regulations can bring down so many listed education players (0ver 90% losses) and even State-owned Investment vehicle like Temasek with its scholars and investment analysts could not prevent it from happening and had to suck thumb and take in the losses.
As retail traders, you think you have privy to more sensitive or insider information ? Again, believing in something is sometimes a game of contradiction. It is hard, I know to maintain a lukewarm approach, either you are obsessed with it (be it religion, food, fitness, fame, money,etc) or you are aloof . The in-between are trying to up their level or downgrade to another level.
As humans, we strive to improve ourselves, driven by our beliefs that with more effort, more discipline, more focus, we can achieve. And that itself has given us so much on a global scale, look around all the innovations that we enjoyed now that our forefathers lack in their time. We are talking about robo-taxis (Grab - should you be concerned ???), cryptocurrency when not too long ago , we were still carrying cold hard cash (will it be gone when my kids grow up in 10 years time ?) and kids dreaming of becoming youtube influencers (who needs Degrees anymore ?
Learn to diversify your RISKS as the first rule of Investing is to not lose your capital. Learn how to protect the downside FIRST and not get overly blinded by the unlimited UPSIDE that is sold to you.
What I learnt most from this article is not about the share price of this debt laden developer but the poor cleaning company, Fei Yun Cleaning Coy who has US$3 over million unpaid debts owed by Evergrande, the most talked in town property developer, rumoured to go bankrupt.
With 90% of his business given to Aoyuan property developer, during the good times, he could afford to expand his business and make money. But the failure to diversify his customers base has painfully and regrettably landed him to sell his beloved car and mortgage his apartments in order to keep his business afloat.
Similarly in the good days of the tech craze or now the crypto craze, people are ploughing more money into a single asset, believing the sky is the limit and easy money can be made. While it is true that some has become overnight millionaire or multi millionaire , we must not let these stories influence us too much. Easy come, Easy go, as the saying says.
No one single industry can dominate forever just like the Law of Nature. The winter may be harsh and colder on certain times of the years but it will soon passed and Spring will arrive. This is the Law of Nature, nobody can change it. The stock market operates the same, man can manipulate it by propping it up with ultra to negative interest rates, pumping in more money into the system and all other means but the higher it goes, the harder it will fall.
The question that God knows is WHEN will that day comes. We are now seeing how a single country like China and its strong regulations can bring down so many listed education players (0ver 90% losses) and even State-owned Investment vehicle like Temasek with its scholars and investment analysts could not prevent it from happening and had to suck thumb and take in the losses.
As retail traders, you think you have privy to more sensitive or insider information ? Again, believing in something is sometimes a game of contradiction. It is hard, I know to maintain a lukewarm approach, either you are obsessed with it (be it religion, food, fitness, fame, money,etc) or you are aloof . The in-between are trying to up their level or downgrade to another level.
As humans, we strive to improve ourselves, driven by our beliefs that with more effort, more discipline, more focus, we can achieve. And that itself has given us so much on a global scale, look around all the innovations that we enjoyed now that our forefathers lack in their time. We are talking about robo-taxis (Grab - should you be concerned ???), cryptocurrency when not too long ago , we were still carrying cold hard cash (will it be gone when my kids grow up in 10 years time ?) and kids dreaming of becoming youtube influencers (who needs Degrees anymore ?
Learn to diversify your RISKS as the first rule of Investing is to not lose your capital. Learn how to protect the downside FIRST and not get overly blinded by the unlimited UPSIDE that is sold to you.