Going crazy over investment losses
The ongoing legal tussle between tycoon Oei Hong Leong and Citibank was reported in the Prime News section in today’s edition of The Straits Times. Such lawsuits have been reported in the past and more such lawsuits can be expected after the market meltdown, according to The Straits Times.
From our conversations with High Networth Individuals (HWI) with accounts in private banks, unlike Mr Oei who is a savvy investor, many of them don’t have the faintest idea on what they are buying into. Scores of HWI investors have been burned badly in this crisis, many of them suffering far worse losses then retail investors. The reason was leverage.
Loans was offered to the clients for them to increase their investments. For the banks, they earn more through the interest on the loans and the fees incurred in the underlying products while the client holds the risk of both the investment and the additional loan. In a booming market, this would work out fine as the investor would ‘earn more’ (alot of the potential returns may have been taken up by the fees). In a crisis, the investor would lose both on the initial capital and the additional loads.
Some of these HWI have lost a majority of their retirement funds and some have even have developed psychological problems due to the magnitude of the loses. Unlike the high profile case like Mr Oei’s, we may never see such reports in the papers.
For some, they may never see the kind of assets they once have. However,something must still be done to rectify the problems and avoid further losses.