Question

Thandi works as a portfolio manager at VBS bank, which is a registered financial services provider. Over the weekend, she attended a friend’s braai party. Nandi, a friend of hers, mentioned that she was considering buying shares in Phonix, a company that had just recently listed. Thandi then recommended that Nandi consider investing in the company. During the week, Nandi then bought the Phonix shares, but over the next two weeks the shares declined and she ended up most of her original investment. Nandi was furious and hurt that her friend would provide her with such bad advice. In turn she then decided to sue Thandi as she blames her for the bad investment decision.

Questions:

• Do you think Nandi can Sue Thandi? Motivate your answer.
• List at least 1 element that one should consider when giving advice to clients.

Answer 1

The stock market can help you make a lot of money, but you can lose all your money if you are tempted to invest randomly without knowing the nitty-gritty of the market.

I think Nandi have no right to sue Thani. The investor (Nandi) cant sue the manager of a startup if it fails,provided they have invested for equity and not loan. Because, the terms and conditions are clearly mentioned in the agreement, investor should aware about all the stock market before investment.

• EDUCATE YOURSELF, HANDLE BASICS FIRST

Before making your first investment, take the time to learn the basics about the stock market and the individual securities composing the market. there is an old adage: It is not a stock market, but a market of stocks. Your focus will be upon individual securities which you are investing in and the relationship with the broader economy and the factors that drive your stock. Some important area which you should be familiar with before entering the market are:

1. Don't put all your eggs in one Basket: This is a piece of advice which means that one should not concentrate all efforts and resources in one area as one could lose everything.
2. Understanding financial metrics ans definitions
3. Never jump blindly into stock markets: you might never have invested in the market, but after hearing about all those things you also decide to buy some stocks.However, if you entered the market just to remain in the mainstream fashion, you have landed in for the wrong reason. you should invest in the stock market after getting the basic knowledge about it and in accordance with your financial goals.