Maika Holding's Investment Lessons (Part 2)

As promised in my previous post, I shall reveal the mistakes that the investors of Maika Holding have made.

Take a loan to buy shares
 As the stock market is a volatile investment vehicle, one should not take a loan to buy shares. One cannot be certain if the return on investment (ROI) will be profitable enough to cover the loan interest in the short term. If the ROI is low or not high enough to cover the loan interest, one could easily make a lost.

Confidence in Government-linked companies (GLC)
This is one of the myth that uninformed new investors are led to believe. In the past decades, history has shown that not all GLCs are well-managed and performed well financially. Some even have negative ROE! You may ask, "Aren't GLCs stable companies and won't go bankrupt because they are backed-up by the government?" It may be true that GLCs won't go bankrupt but one must always remember this fundamental investment principle: Share price movement is always fundamentally tied to the company's earnings. As there are better companies with better financial performance out there, why invest in a losing company (even though it's a GLC)?

Hop into the train too early
Many unwary investors lost money when they buy into IPOs or new investment scheme. To reduce the risk of losing money, it's wiser to wait for the company to mature for at least 10 years before deciding to hop into the 'train' or not. As there are many 'trains' with at least 10 years proven track record, why hop into the 'new train' with lots of uncertainty?