5 financial lessons regular investors can learn from The Goldfinger

The Goldfinger, a blockbuster movie jointly produced by AMTD Group (which also owns AMTD PolicyPal and ValueChampion), has been making waves at the theatres. Set in the 1980s, it is directed by Felix Chong and stars veteran heavyweights Tony Leung and Andy Lau.

This pacey film that centres around white-collar crimes in late-colonial Hong Kong still holds vital financial lessons for contemporary finance, and regular investors like you and me. Here's what we gleaned from it.

Film synopsis

The Goldfinger is inspired by the rise and fall of the once-mighty Carrian Group, a Hong Kong conglomerate helmed by former businessman George Tan Soon-gin that experienced exponential growth (unprecedented in 1980s Hong Kong) but ultimately crumbled due to allegations of fraud and even the murder of a bank auditor.

The film gives us a sensationalised depiction of what went down, chronicling the rise and fall of the fictional Carmen Group and cat-and-mouse game between Carmen Group's founder and CEO Henry Ching (played by a constantly smirking Tony Leung) and Lau-Sir the principal investigator from the Independent Commission Against Corruption (played by Andy Lau) that spans over 15 years.

During this time, Lau conducts thorough investigations, bent on bringing Ching to justice, as the latter manipulates the stock market, making a fortune for himself by charming bankers, backers and auditors to fund his group of enterprises with exorbitant loans, thereby keeping them afloat and keeping up the ruse of his successful ever-expanding empire, and in turn attracting more investor money.

Carmen Group's machinations mimic Carrian Group's real-life ones, and the fallout from Hong Kong's biggest financial scandal of its time holds key lessons for the contemporary investor.

Financial Lesson #1: Don't buy into market sentiment

In the movie, Henry Ching is the protagonist who starts out as an aspiring engineer but gets sucked into a world of property speculation with his partner-in-crime KK Tsang (played by Simon Yam). The two make a multifold profit each time by pushing up the prices of the land they buy and generating public fervour for these properties.

The lesson here is to exercise prudence and make your own sound judgement after doing sufficient research instead of getting swayed by market sentiment and market trends as there might be speculators manipulating the markets and pushing up stock prices. As in the case of NFTs and meme coins, just because everyone is investing in the latest, hottest asset doesn't mean it is legitimate or financially safe.

Financial Lesson #2: Do sufficient research on every company you invest in

In the movie, Henry Ching uses his rapidly inflating share prices to eat up more assets that are in turn used as collateral for his next purchase.

Later, Henry Ching employs Carmen Cheung (played by Charlene Choi) and ceaselessly establishes multiple companies in various industries (from travel agencies to schools to F&B establishments) under her name, establishing the ubiquitous presence of Carmen Group.

This in turn boosts investor confidence (in a familiar name) and earns the group millions in investor funds, which it then uses to set up more companies and generate more earnings. Stock prices soar from $1.50 to $9 at one point. Yet, underneath it all, there is the question of where the money originated for Henry to make conquest after conquest.

It's important to understand that many conglomerates can have a finger in many pies, and while not all of them are involved in fraudulent activities and market manipulation, some of these companies established under the parent company deserve a closer look at their businesses, practices, and earnings before any investor dumps their hard-fought earnings into them. Be sure to research each company you choose to invest in, rather than buying into market sentiment and going with the most popular or talked-about stock.

Financial Lesson #3: Diversify your portfolio

Stocks should not be the only asset in your portfolio because not only are they volatile and susceptible to market conditions and shifts in investor sentiments, they are also privy to manipulation, all of which can affect stock prices.

The Goldfinger is a study of the stock market and its unpredictability. It exemplifies just how exposed the average investor can be if their portfolio consists only of high-risk assets like stocks. While other factors came into play for Carmen Group's downfall, the lesson remains that an investment portfolio should always be diversified to mitigate risks when one asset underperforms. It would be wise to diversify your portfolio with various other assets with different risk levels, such as ETFs, bonds, ETFs, mutual funds, gold, commodities and more so that you do not put all your eggs in one basket.

Financial Lesson #4: Paper gains are not gains until it has been realised

In The Goldfinger, Henry Ching declares that stocks can be used like cash. That's a bold statement that only someone who has successfully manipulated the stock market can say. But when the Chinese government stepped in to purchase central properties at below-market prices after the 1982 Sino-British Joint Declaration (a treaty agreeing that all of Hong Kong would be returned to China in 1997), which set off public anxiety about their shares and motivated investors to liquidate their assets.

This caused the stock market to crash, and Carmen Group's stock prices to plummet to its lowest ever value. In turn, the remaining investors saw their paper gains evaporate overnight without them ever realising any of the profits. Upon the liquidation of Carmen Group, general shareholders also received nothing.

This demonstrates that paper gains aren't necessarily the most trustworthy metric of how well a company or your investment is doing. Instead of waiting for the next peak, sometimes it is more prudent to sell some of your shares when you have made a sizeable profit instead of HODL ("holding on for dear life").

Financial Lesson #5: No corporation is truly 'too big to fail'

Image: Unsplash In the movie, the rich (unscrupulous market-manipulator Henry Ching and his entourage) get mega-rich by acquiring companies and properties, expanding his empire, clout and, of course, assets and wealth. In a hyper-capitalist economy like Hong Kong's, where rampant corruption led to the establishment of the ICAC, the lack of red tape in place allowed Ching to bribe directors, CEOs and the like across various countries to acquire bank loans to expand his empire.

But even for mega conglomerates that have businesses in various sectors and are buoyed by investor funds and loans, such as Carmen Group in the movie, everything can come crashing down once stock prices plummet.

Real-life Carrian Group, which was believed to be 'too big to fail' (much like Lehman Brothers in 2008) ultimately met its downfall due to a double whammy-one, its snowballing debt as a result of share-price manipulation and taking massive bank loans; two, the local currency crash triggered by anxiety over the 1982 Sino-UK negotiations on Hong Kong's status. Its fraudulent activities also came to light in the end, putting in the final nail in the coffin for the company's fate.

Every investment comes with risk, and no investor worth his salt would be complacent enough to think that any corporation is truly too big to fail.

Conclusion

The Goldfinger may be a fictionalised and sensationalised account of the real-life Carrian Group, but the financial lessons it offers are vital for any investor looking to dip their toes into the stock market.

A sound investment strategy is vital for hedging against the volatility of the stock market, and The Goldfinger-which mirrors the real-life travails of Carrian Group-serves as a cautionary tale for investors looking to make a quick buck off the stock market.

Investors-be it newbie or seasoned ones-who decide to participate in the stock market should always do their due diligence and sufficient research on each company they put their money in, not give in to market sentiment, and make prudent decisions for modest gains rather than anticipating exponential gains in a short period of time.

With these financial lessons in mind, if you're ready to make your foray into investing, you may check out our roundup of the best online trading platforms that can help you along in your investing journey.

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This article was first published in ValueChampion.