| Financial education plays an important role in my life. | | | | foreign investors may withdraw their funds from the |
| Ever since I have realized that it is important to make | | | | stock market. This will result in the stock market |
| money work harder for me, I have been constantly | | | | crashing. In other words, I will lose money in my stock |
| reading and learning about financial education. With the | | | | investment. |
| new knowledge that I have gained each day, I have | | | | Next, there is a risk of external events that will affect |
| realized that I am improving in my ability to identify risks | | | | the stock market. For instance, a terrorist attack will |
| in an investment. | | | | affect the stock market because the confidence of |
| Identify risks is the first step to evaluate an investment. | | | | investors is shaken. Similarly, a great natural disaster |
| If I want to be a sophisticated investor as defined in | | | | will affect the stock market. |
| the Rich Dad's series by Robert Kiyosaki, then I | | | | Then, there is currency exchange rate risk. This is true |
| definitely need to be able to identify risks in an | | | | if I have invested in stock that is listed in foreign |
| investment. If I do not know what are the risks | | | | currency in a local stock exchange. Another possibility |
| involved, I will not be able to manage the risks. If I | | | | is that I have invested in a stock listed in a foreign |
| cannot manage the risks, then I will have a high chance | | | | stock exchange. If the share price increases, then I |
| of losing money in the investment. That is something | | | | should be making money. But if the foreign currency |
| that I want to avoid. If I had foolishly invested without | | | | depreciates in value against the local currency, then I |
| the knowledge of the inherent risks in the investment, | | | | may end up losing money. |
| then I would be considered to be a gambler than an | | | | Lastly, there is a risk of leverage. Before I am allowed |
| investor. | | | | to trade in a stock market, I will need to have a |
| Every investment has risks that are obvious and risks | | | | brokerage account with some money. Usually, the |
| that are hidden. Someone with a little knowledge can | | | | brokerage firm will allow me to leverage by trading up |
| easily detect the obvious risks. But for the hidden risks, | | | | to several times the amount of money in my |
| it takes someone who is experienced in that field to | | | | brokerage account. Sometime, the brokerage firm |
| see. | | | | provides margin account for trading to enhance |
| Take stock investment as an example, what are the | | | | leveraging. |
| obvious risks and hidden risks involved? | | | | Leveraging is a two edged sword. It can work both |
| The first obvious risk is the risk of losing money. If I | | | | ways. If the share price goes up, I can make more |
| have invested in a stock and the share price drops, | | | | money by leveraging. If share price goes down, I will |
| then I will be losing money. | | | | end up with a lot more money to pay because of |
| The second obvious risk is that a company can go | | | | leveraging. Leveraging is like a magnifying glass that will |
| bankrupt. When a company go bankrupt, the shares of | | | | magnify my trading mistake. |
| the company become worthless. | | | | The list of hidden risks may not be incomplete since I |
| The third obvious risk is that a company may de-list | | | | am still learning about stock investment. The main point |
| from the stock exchange. When a company de-list | | | | that I want to raise is that financial literacy is important |
| from the stock exchange, the shares become | | | | as highlighted in the Rich Dad's series by Robert |
| worthless. | | | | Kiyosaki. I have simply used stock investment to |
| What about the hidden risks? | | | | illustrate my point. |
| Firstly, there is a risk of addiction in stock investment. | | | | * DISCLAIMER * |
| This will cloud my judgment in selecting stocks to | | | | The author only provides the material and information |
| invest. Where does the addiction come about? When | | | | as a layperson's views about an important subject. |
| the share price goes up, I feel excited because I am | | | | The materials and information are from sources |
| making money. The effect of excitement is like drinking | | | | believed to be reliable and from his own personal |
| liquor to feel high. When the share price goes down, I | | | | experience, but he neither implies nor intends any |
| feel depressed because I am losing money. The effect | | | | guarantee of accuracy. |
| of depression is like taking alcohol to feel low. This up | | | | All the materials, information and procedure in this book |
| and down of emotions is a source of addiction. In fact, | | | | are only the author's personal opinion. You must |
| this risk exists in investments such as options, | | | | consult your own professional advisor and other |
| currencies and commodities. | | | | reputable sources on any matter that concerns you or |
| Secondly, there is a risk of falling in love with a stock. | | | | others. |
| Again, this will impair my judgment in selecting stocks | | | | The author, publishers and distributors are not |
| to invest. How do I fall in love with a stock? Well, all I | | | | competent and do not profess to give legal, |
| need to do is to make money from a particular stock | | | | accounting, medical or any other type of professional |
| a few times. Thus, I have attached a positive | | | | advice. The reader must always seek those services |
| experience of making money by investing in that stock. | | | | from competent professionals who can review your |
| When I am selecting stocks to invest, I will have | | | | own particular circumstances. |
| tendency to select that stock again even though the | | | | The author, publisher and distributors particularly |
| technical analysis or fundamental analysis says | | | | disclaim any liability, loss, or risk taken by individuals who |
| otherwise. | | | | directly or indirectly act on the information contained |
| Thirdly, there is a risk of the government changing the | | | | herein. All readers must accept full responsibility for |
| policy thus affecting the stock market. If a government | | | | their use of this material. |
| changes the policy that impacts investment negatively, | | | | |