The 1 investing rule from the Swiber saga

News about Swiber appear almost everyday

I did a Google search, and all these results came out.

Seems like Swiber is quite a hot topic these days. So what is the hype about Swiber? In one sentence: Swiber, an O&G company, has defaulted on its bonds, which were sold to many individuals in Singapore.

What can we learn from the Swiber episode?

There are many news report about how individuals have bought Swiber bonds, and ended up hurt by the default. This news report particular talks about Singapore's not-really-rich being burned by Swiber bonds.

When individuals buy the bonds, they should already have understood that there is always the possibility of default. For bonds, the possibility of default is known as the credit risk, or default risk. Whenever you buy individual bonds, the default risk is always non-zero.

When the bonds default, you have no-one to blame but yourself. You should have already known of the risks of investing into debt. The question continues: why do people who do not understand finance buy into such products?

They are probably misinformed investors, or investors who choose to take a risk with their lack of knowledge. It is these investors that shouldn't be buying into individual securities or debt. This brings up the most important rule in investing: don't lose money.

This most important investing rule is easy to understand and follow

If you want to never lose money in investing, then you have to buy an asset that never goes bankrupts. In the long run, this asset should appreciate, and never depreciate. While it is true that individual securities and debts can go bust, this will never happen by investing in the entire basket of securities and debts.

The stock market as a whole is an asset that appreciates in the long run. This post over here explains why. It is best to invest in a portfolio of appreciating assets, and ride out any market volatility over time.
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