Kobe Steel scandal of ‘falsifying data’ on some of their products make it a nightmare for hundreds of firms worldwide.
A disaster
This type of bad news is certainly disastrous to investors who had concentrated position in such company.
Kobe Steel share price tumbled 42% within a week. No matter how hard we research a company, we will have difficulty to quantity the human’s integrity using figure. If one day AI can help to do some prediction of human Integrity using some kind of index, I think that will probably be a very great innovation for the mankind.
We are always blindsided by appearance
We, as investors, are often blindsided by the firm’s business/industry growth prospect, and forgetting that data can be massaged and presented in the ways that mislead (and the worst is cheating) stakeholders.
Diversification – mitigate company risk
As some Investors may argue that ‘Diversification is protection against ignorance’, but I strongly suggest investors to think more in depth, and be more realistic about what we can and cannot do. Unless we have a chance to speak, have access to the board and managers of the company, we can’t accurately size up a person’s character and integrity solely based on Annual Report. I still advocate what the Financial Theory advocate, diversification is one of the effective ways to minimize the Company Risk. However, to be frank, I don’t believe in over diversification as well. E.g. buying 100 companies, this is ridiculously excessive. We need diversification but in my opinion it shoul not be excessively diversified.
Keen to find out how you can include Stock into your Investment Portfolio? Feel me to drop me an email [email protected] or call me at +65-91880356 for an non-obligatory discussion now.
