Better safe than sorry, learns investor

An employee from Professional Investment Services (Beijing) Ltd introduces wealth management products to a visitor at the Beijing International Finance Expo this month. Wu Changqing

"Chinese are known for their thrift. I was taught to do so by my parents and teachers since I was a child, and then by my wife," he says. "Many believe that's the only way to make a fortune."

Ever since he got his first salary of 3,000 yuan in 2001, when he joined a government department in Beijing, he has been putting away as much as he could. Three years of intense saving did translate into a neat bundle of 100,000 yuan.

Zhou then found another job in the Shanghai office of a global insurance firm in 2005 with a salary of 13,000 yuan a month. The sudden pay jump prompted Zhou to rethink his, or rather his wife's, philosophy.

That year the mainland stock market began to surge, enticing a growing number of new investors. Zhou joined the gold rush. "I thought it was time to let money make money."

After a long chat with a friend who worked in a foreign bank in Shanghai, Zhou decided to take the plunge, "betraying" his wife "for the first time".

Price-earnings ratio (P/E) was the only stock jargon the rookie investor knew at the time. "I studied P/E by reading articles on the Internet and decided to buy some steel shares. At the time they were so cheap compared with global steel shares," he recalls.

In just a few weeks, he made 40,000 yuan, a 25 percent return, enough to bring even Zhou's wife around. Before Zhou's sterling performance, she was convinced he was "playing with fire".

Having made the easy money, Zhou's confidence, and greed, increased and he put nearly all his savings into shares. "I used to dream of becoming a millionaire, and I thought I was so close. Making money seemed so easy."

Gradually Zhou began to be sucked deeper into the world of bulls and bears, reading up anything he could find on the stock market. Armed with this fresh knowledge, he began to play the market more actively, jumping in and out of stocks, investing in everything from blue chips to penny stocks, all based on his own analysis.

Ironically, the more he studied, the more losses he seemed to be making. His investments in some hi-tech, little-known shares quickly ate away the profit he had booked from blue chips. Before he knew it, he was in the red.

Zhou finally realized he was not really a qualified investor and day trading was not something one could do on the side. "I was too eager to make quick money, never thought about long-term investment."

On top of that, his wife began to complain that he was neglecting the family. "She told me to marry stocks. I was spending nearly all my after-work hours on the market."

Serial losses and marital discord forced Zhou to change his strategy. These days he only buys large-caps and holds them for at least six months before selling them.

"I have to focus on long-term prospect," says a wiser Zhou. The new perspective has worked. His investment return more than doubled in 2006 and continues to increase this year. And, he doesn't need to watch the market every day and has more time for his family.

"I think this is the way to go," he says, adding that he doesn't see any need to pull his money out of stocks to invest in other financial products such as insurance and bonds until the market enters a bearish cycle.

(China Daily 11/14/2007 page15)