I’m not taking a stand on anything other than the hype and its impact on investing. An acquaintance of mine excitedly told me about a new Finnish defense industry company that a couple of colleagues had already invested a decent sum in as their very first stock investment. Inspired by this “surefire tip,” the plan was to also invest a relatively significant amount in this promising company relative to their personal finances. At the time, the share price was just over 10 cents.
We talked about it, and ultimately, my acquaintance decided not to invest, partly due to their financial situation and partly, presumably, because our discussion helped them understand the risks involved.
The next chapter of the story was written when my acquaintance noticed that the company’s share price had “jumped” to over two euros. They were regretful and noted that they had missed out on a really large sum of money. Well, we went through the reverse split and had a brief discussion about how much of the invested capital would actually be left.
This true story should raise the question of whether this kind of start to one’s stock market journey encourages future investing in stocks, or whether it becomes yet another lesson for new investors, after which stock investing is no longer seen as a viable option for their money.
And it’s not worth commenting on this post that risk is an essential part of investing, or whether it could have been deduced from the hype surrounding the company, or if one could have found indications of that risk by reading the company’s disclosures—the very risk that acted as the counterweight to the massive return expectations presented to new investors.
I’m not blaming anyone; I’m just stating that, in my opinion, a better outcome could have been achieved here. Although nobody knows the future, and this saga might still end brilliantly.