It is often said that the rich becomes richer and the poor becomes poorer. Globally, the issue of social gap is entrenching in many cosmopolitan cities. Even Singapore, which is home to one of the largest concentration of millionaires in the world, is no exception. One of the key questions is how did the rich make their money and preserve their wealth in times of crisis? In one of the financial workshops I attended recently, the consultant briefly shed some light on how the rich made their fortune.
Every now and then, you would have heard about investment themes like renewable energy, technology, currency, property, ETF, gold/silver, investment-linked insurances and what not. These are actually hypes made by the movers and shakers to create bubbles so that small time investors like you and me will buy-in. What happened was that years before the bubbles occurred, the ultra rich gathered their analysts and made them formulate new investment themes. After determining areas where they can reap in big monies, the rich dudes then pump in their funds. They would hold press conferences and churned out quantitative data and charts to convince retail investors that their investment themes are the next big things. Journalists and investment researchers would then write extensive reports and provided the maximum publicity. Interviews would be held one-to-one with the key players. Again, when these gurus were interviewed, they would reinforce and sell their investment themes to the public. Usually when these influential people speak, people usually listen to them because in this world, track records and reputation give you credibility. These are the people who can influence the market direction. They can help you make money, but also lose money as well. At the height of the bubble, they would “show-hand” and pull out their funds, making tons of money for themselves, and in the process, burst the bubble. When this occurred, small time investors got burnt and lost their money. Always remember that when it comes to investing, it is always a zero sum game. For every winner, there is always a loser.
So what are the key lessons for investors like you and me? Firstly, whether you like it or not, the market will always be controlled by big players. These movers and shakers are so called “whales”. When the whales flipped their tails, a lot of fish like you and me can be injured if you are in their way. So whenever the guru speaks, always think critically of what they said because you never know whether they are vested. Do not speculate or invest in stocks just because some wealthy dudes are vested in these companies. Always do your homework and not to “herd” along with the rich dudes, thinking that you can make money with them or outwit them. You can’t.
Secondly, if you follow my blog, I always advocate investing your monies during crisis. Whenever there is a crisis, very few “experts” would come out and encourage people to invest. But these are the only window of opportunities available for retail investors to create wealth. As the saying goes, every crisis comes with opportunity. So grab hold of opportunity when crisis strikes!