Would You Like to Pilot a F-15 Fighter Jet?

Last week, I was browsing Sharejunction forums and came across a post by an investor who lost more than SG$100,000 in Asian Pay Television Trust. His questions struck me particularly hard, so I will dedicate a post to answering him.

Hihi all wish all a good day. Am very glad to hear some positive news from dear fellow bros and investors. Am still holding on to my 200000 shares. As stated before, [I] lost a lot and I believe those who invested in the early days experience this before too. So right now should I just hold on to my shares or add more hoping the share price will rise to at least 20 cents and above in near future? Could someone explain what is excess rights? Means APTV is raising money so it can privatize? What if it’s privatized then offer us shareholders a low price mean all our hard earned money gone already? Could someone kindly enlighten [me] please? 

Brian

I would love to answer your questions Brian, but there is something more basic that you need to understand first.

Brian, suppose you were planning to fly from Singapore to Japan for your next holiday. A genie appeared and gave you 2 transportation options…

1. Take a Boeing 777
2. Fly a F-15 at supersonic speeds there yourself

How do the options stack up?

Option 1: A plane ride from Singapore to Japan takes about 7 hours and costs less than a new iPhone. This is the logical approach.

Option 2: If you are an adrenaline junkie with a plane license, this is the faster method to get to your destination. The F-15 jet at top speed would reach Tokyo in 2 hours. You get to brag about it on Instagram and pose like Tom Cruise!

Which one would you choose? I hope you are sane and picked option 1 like most people do. It is easy, not too slow or expensive.

Flying your own fighter jet is really dangerous! Do you have a plane license? Are you familiar with things like thrust, drag, lift and flaps? Do you know how to operate the radio on the international aviation channels?

Right, you don’t know, so you shouldn’t even think of trying. If you did, you won’t get to your destination. You will crash and burn faster than the time it took to pack your holiday luggage.

When it comes to investing, you just took option 2!

You see your problem now? If you don’t, let me draw a clearer analogy. When investing, you actually have 2 broad options.

1. Buy a mix of stock index funds and bonds funds.
2. Buy individual stocks and bonds. Navigate the financial statements yourself

Option 1 is easy and safe. If you had bought the ES3, an exchange traded fund (ETF) that tracks the STI index, your annual returns would have ranged between 5% to 7% in the last 20 years. If you think Singapore’s market is for losers, you could also buy the SPY, an ETF that tracks the USA’s S&P500 index . If you did that, your long term returns range between 7% to 11%.

A crisis here, a default there, fear is everywhere. But you don’t care and just collect that sweet dividend and watch your capital increase with inflation every year. As long as Singapore’s top 30 companies and the USA’s top 500 companies do well as a whole, you can just do the financial equivalent of boarding the plane and watching your TV show.

Option 2 helps you get to your end point faster for sure. But did your broker specify what your end point is? Judging from your post history, your end point looks like financial ruin to me!

I am not trying to scare you, but with your current knowledge, individual stocks are too complicated for you. If you don’t understand the term “excess rights”, wait till you come across “volume weighted average price” and “non-callable mandatory convertible bonds”.

Pilots and investors spend years of training before getting into action. You don’t know anything but are trying to flip through a manual while your fighter jet is in the air, on fire. You need to get out now.

What to do from here?

Brian, if you’ve read this far, perhaps you’ve acknowledged that you need help. Here are my recommendations for you.

Step 1. Sell all your stocks now. Don’t care whether they are gains or losses.

Step 2. Read all of these books. Be honest with yourself and finish them.

Step 3. If you did 2, you will know what ETFs to buy moving ahead.

Step 4. If you still don’t understand anything after steps 2 and 3, it is OK. Search for an independent financial advisor on Seedly and pay them for personalized advice.

Just realize all your losses and sell now. A loss is a loss – the phrase “paper loss” is a myth invented by brokers when they couldn’t find anything better to say. Invest your time and energy into your financial education. I guarantee this “hot tip” is way more profitable in the future.

Don’t Feel Bad

Here’s a virtual hug of comfort for you. I understand how you feel and can empathize with you. After I read your post, I couldn’t sleep.

I felt horror because you reminded me how close things can get – my mother was an investor in APTV during its IPO. When I read your questions, I read it in her voice. Luckily, she exited in 2015 before things started to unravel. She could have been the one asking the same questions as you did today.

I also felt sad because I could feel your helplessness. In 2008, my mom lost a big chunk of life savings gambling in the stock market. It was a dark time for my family and you reminded me about it.

Instead of blaming you for recalling old nightmares, I decided to help you by writing this post. I hope you will read it seriously.

The first mistake was getting in that fighter plane. The second mistake is to dream of recovering your “paper losses”. You are not reaching Japan, I assure you.

Don’t make the last mistake of crashing with the plane.