A note to my 19 year old self Part 3

I am pretty much a private person but yet I am that kind of person that has all my feelings written on my face. As I reaped the benefits of investing slowly, I started becoming relatively vocal about feeling triumphant from this small success of mine. My mum being the typical risk averse person, or maybe someone she knew got burnt from stocks, warned me about the potential hazards of the stock market. To which I fully agreed. Though I had never really gone through much of a loss at that point in time, I knew fully well that the stock market is a dangerous place. I always had the mindset that to not lose in the stock market alone was already a plus, much less to say earn money from it. But I assured her that the stocks I was buying were relative safe and defensive. My aunt who had been staying with us for a while would hear about my stories once in a while over the various meals we had.

Structured Deposit ≠ Fixed Deposit

I remembered there was this one day when my aunt summoned me into her room. She looked very anxious and I was wondering why. She went on to show me a statement she had just received from one the banks and was wondering how come with her deposit, she had not received any interest at all for the past 5 years. I went through the statement and probably already had an idea of what was going on. 

So I asked her, "What did you actually want to do with your deposit?"

She went on to say, "I had wanted to do a fixed deposit at the bank to earn interest."

I told her "No, that was not what the bank officer did for you."

She looked confused but I went on to elaborate anyways.

"The Well-dressed Ah Beng wearing a Hermes Belt and a Rolex Submariner trying to look decent despite having a hangover from last night's drinks salesperson at the bank signed you up for a structured deposit."

She looked like she wanted an explanation of the difference between a fixed deposit and a structured deposit. So I obliged with a reply.

"A fixed deposit is a form of saving with a fixed interest rate payable. A structured deposit is an investment. And when I say investment, it means there is a risk of you losing money. That is also why they sent you this report and from what I see it seems like the fund lost money in all sectors that they invested in. The % returns that the salesperson showed/told you about is not guaranteed. It is subjected to the performance of the fund."

She held her silence for a bit trying to understand the whole story after which she looked back at me and asked "what does it all mean?"

I felt bad when I said, "Ah yi, I am sorry, there is no interest for you." 

It was almost like 9pm drama when I felt my aunt's helplessness because you have to understand my aunt is not some Chief investment Officer, well versed in financial knowledge or planning. My aunt was a blue collared worker, a chef. Her work is back breaking, requiring her to stand and work tirelessly long hours for her keep. And there I was, looking at the situation with regret that she somehow got sold by this unethical salesperson trying his best to hit his sales target for the month to avoid getting screwed by his superior who wants to avoid getting screwed by his manager who wants to avoid getting screwed by his director who wants to present great performance showcasing his leadership to the organisation so that they can all go for drinks with their thick pay and bonuses. I was utterly disgusted.

I went on to say "Well to look on the bright side, at least this structured deposit is capital guaranteed. This means your capital is safe to be returned back to you. At least they never totally bring you to ho lan dire straits. Oh well, its just 5 years worth of interest, don't lose sleep la." We both smiled.

Aunt bought in

I was so disgusted in fact I did not expect myself to make my aunt an offer. I told her, after we had both calmed down, that if she was comfortable, she could withdraw her capital from the structured deposit and she could leave it with me. I would invest it on her behalf and that if there were any losses, it would be on me. The gains from the investment I did would belong to her. She did not even hesitate and straightaway took up my offer. I was excited and looked forward to outperform the returns from that bloody structured deposit...

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