Golden rule : Don't follow the herd
2001-06-06
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RISK comes from not knowing what you are doing, says the legendary Mr Warren Buffett, who has been hailed as the world's greatest investor.
It is a pearl of investment wisdom which gold expert Albert Cheng, 48, regional director of the World Gold Council, has acquired through a painful path.
While he knows more than most people about the dynamics of the gold trade, it is another story when it comes to investing in stocks and properties.
As he tells it, he bought shares of Pacific Century Cyberworks, which is headed by Mr Richard Li, the son of Hongkong tycoon Li Ka-shing, at $2.60 a share -- just before it peaked.
The once high-flying technology stock has lost a whopping 60 per cent or so, he figures.
"I bought it because it's got a good name and good management, and Richard Li is so savvy. It was the wrong timing," he says.
Mr Cheng, who hails from Hongkong, has also invested in properties here -- at the peak of the cycle, as it turned out. They have fallen about 30 or 40 per cent in value.
"I followed the herd instinct," he says with a touch of regret.
His investing experience with gold is a happier story: "I've been quite lucky in the last two years."
For example, he bought gold contracts in September 1999 when gold was at US$270 an ounce -- and sold out at US $310 an ounce five months later through Phillip Securities.
It was a big Chinese New Year hongbao he gave himself.
Later in April, he scooped up gold again when it fell to US$280 an ounce.
Instead of rising as he expected, the price dipped further and stayed down. Impatient, he put in a sell order at US$285.
In recent months, the price firmed.
It surged just two weeks ago to as high as US$309 an ounce. He ruefully wishes he had sold at that level.
He also has passive investments via a gold savings passbook and a collection of maple leaf coins worth more than $10,000.
He cannot wait to buy gold contracts again if they soften again.
"The price of gold is quite near the bottom. The cost of production is close to the current market price."
Thanks to gold's new glitter, he intends to resist the lure of other investments: "I'll never put money into technology stocks again."
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