Tuesday, September 26, 2017

AVOIDING BAD INVESTMENTS



Welcome brothers to a new video of my channel brothers in dividends.

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Today we'll talk about avoiding bad investments by using two examples.
The first example is the purchase of Popular Bank, once considered the best managed bank in Europe, by Santander Bank for 1 euro.
The consequence of this operation is that Popular Bank's shareholders lose absolutely all their money, and so do its Bondholders.
It's not one or two either, just its shareholders are 305.000 people.
The second example is the return to the stockmarket of Pescanova.
Pescanova is a spanish fishing company producing fresh and frozen fish and other foods.
The company spent the last 4 years suspended of listing, its shareholders having to spend all those years with that money stuck there, not knowing what it will be worth when the share returns to the stockmarkets, and when it finally happened, the share sunk like a rock, losing 90% of its previous price from 4 years ago.
This affected another 9.000 investors.
What can you do to lessen the blow once the inevitable has happened?
In the case of Popular Bank, my guess is shareholders will receive a certificate or document indicating the bank was liquidated; they, like those that sell their Pescanova shares can use it so they have a period of several years to compensate their loses with less taxation from gains in similar products, such as investment funds or shares.
But from these sad and disappointing news I always try to extract some valuable lessons.
The first lesson is that small investors like me have to focus on large companies, with a long history of good dividend yields, and that trade in several international markets, in particular one of those must be the US stockmarket.
Why? because in the US they are particularly demanding of the company's management, which provides more safety for its shareholders.
And the second lesson is to diversify, I can't or shouldn't have more than 10 % of my money invested in a single company, since I can't know for certain the company I invest in heavily won't go down the same way as these two.
I am not great at diversifying, but I understand the need for it, and the terrible loses of those two companies' shareholders are a grim reminder of this.
As always, everyone should make their own carefully considered decisions when managing their money, but whatever you do, best of luck in your investments!

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