How much can one lose in the stock market? oh How much can one lose in the stock market?


Those who want to learn investment can learn from sifu KC.

Dear KC,
I have just retired from my job at the age of 62 after working for 40 years. I have saved a total of about RM2 million now. I would like to have a comfortable retirement life with my saving. Should I follow some of my friends to do some investment in the stock market? I have been busy working as an engineer and has not much knowledge and experience in investing in the stock market.

Dear John,
Happy retirement. I hope you can lead an active and happy retirement life with some new hobbies.
Last year, in my WhatsApp group, there was a similar situation like you. A classmate of us, Jerry, who has been working as an engineer and very good at his work, asked the group if there was any good tip investing in the Bursa market. At that time, the hottest topic in our group was this stock, Green Packet.
Jerry was introduced by some experienced traders in our group who claimed to have made a lot of money doing stock trading, to do trading on Green Packet (GP) on May 11, 2020 when there was this hot news that GP was partnering with the biggest company in China, Tencent Holding, on something fashionable, something like “eKYC”. Never mind what the hell it was, but something “e” and that must be fascinating. My friend started his first stock investment journey and bought some GP shares at about RM1.00 then.
True enough, the share price of GP jumped to RM1.44 within a week on 18 May 2020. Jerry decided to sell to realize the profit the next day. However, he could not sell at RM1.44 as intended as the share price plunged and limit down on opening the next morning, straight to 98 sen. Here was the big story which was published in this Facebook page,
Jerry, like most newbies, refused to sell a share at a loss. In fact, over the next few months, he bought more shares in GP as the share became cheaper and cheaper.
Why sell when there was so many good news progressively coming out from the company as below?
1. GP is incorporating a cloud company- 7 August 2020
2. GP diversified into cloud computing solution and related services- 18 August 2020
4. GP in e-wallet deal- 21 September 2020
5. GP share subscription agreement with Censof- 28 September 2020
6. GP founder, Chinese firm to develop E&E Hub- 20 October 2020
7. Something to do with acquisition of Silterra- 21 January 2021
8. GP disposal of shares in G3 Global Berhad
9. GP application for digital banking license- 1 July 2021
10. GP disposal to major shareholder, CCPan- 20 August 2021
11. GP conditional investment bank license from Labuan Financial Services Authority- 25 August 2021.
12. GP private placement- 4 October 2021
13. Etc., etc.
Being new in the stock market, Jerry didn’t really know if any of the above announcements from the company is good news or not. He thought any news is good. Here was an announcement which he thought was definitely good news.
Green Packet just released its first quarter 2021 results. It makes RM19m in net profit, or 1.6 sen per share for the quarter. Being an engineer, he could easily annualize the result. It will be 6.4 sen per share (1.6*4=6.4) for the year. Putting a PE ratio at 20, GP easily was worth RM1.28, so he thought.
Here was the big news on the above results as published in this Facebook page,
With that, Jerry purchased more shares in GP. Ini kali lah!!!
Today is the official day Jerry retires. He has some time to look at the share market now. He was shocked to see the share price of GP in Figure 1 below.
Figure 1: Share price chart of Green Packet
GP share price has dropped to 14 sen a piece now. The loss since he first bought it less than one and a half year ago is a whopping 86%. He calculated his total loss from all the buying of this stock, and he fainted when he realized he has lost a total of half a million Ringgit!
He now realizes that without knowing much about investing and simply following stock tips, rumours and hypes speculating in the stock market is a very dangerous thing to do.
Well, half a million Ringgit loss for Jerry will not affect him that much in his retirement life as he has accumulated substantial wealth working all his life as an engineer and climbing way up the corporate ladder. He vows to learn about the right way of investing, rather than speculating to recoup his losses, and earn more for a better retirement.
So, John, the story above is just one of those of plenty. I have also narrated a true story how a seemingly experienced and self-claimed super investor I know very well could lose RM200-300 million within a couple of years. That is the peril of stock investing without having the right knowledge, mind set and methodology in investing.
With the above stories, I hope you can make an informed judgment what you should do, don’t you?
Best regards,
KC Chong

Source: KC facebook