Risk of the unknown
The stock market is the most commonly traded investment and is known to give the best returns over time. It is easy to trade and investors just have to buy and hold, for capital appreciation or for dividends.
Yet, two recent events have shown that it is not as simple. One, the decision by the major shareholders of CK Tang to privatise the company. And two, ATIC’s ( Advanced Technology Investment Co, the technology investment company of the Abu Dhabi government) purchase of Chartered Semiconductor with plans to delist the stock from SGX and Nasdaq.
These events reminds us of a risk in share investing that is not known or often ignored by many investors. When investing in stocks, you are buying into a business as a shareholder and you stand to lose your entire investment should the company goes belly-up. However, as a small shareholder, you have no say in how the company is run. Therefore, you are putting your money in the hands of the people running the company. Should the major shareholders choose to privatise the company, you will be forced to exit prematurely. Thus, the odds are stacked against the minority who will not stand a chance up against the bigger players.
