A totally outstanding case happened several years ago in Bangladesh. Being old enough, it cannot be called old-fashioned. For me it's a reminder of how an epidemic ignorance might lead to a catastrophe...
2011 was an uneasy year for Islamic country Bangladesh, as it experienced high-profile protests organized by thousands of individual investors.
Since 2007 and up till 2011, the Dhaka stock exchange was
outperforming almost all the world's markets. Share prices increased steadily over that time, gaining by as much as 410%
in value over the period. In 2010 alone they gained 83%. This
performance was not driven, however, by any such radical changes in the
fundamental strengths of the Bangladesh economy. It vividly showed the economy's weaknesses instead.
The then energy crisis and other infrastructural problems curtailed opportunities for private investment. As a result, both banks and financial institutions invested very heavily in the stockmarket—at more than eights time the levels they had invested four years earlier—driving up the value of shares. With the internet's expansion and the flourishing of brokerage firms across the country, by 2011 there were 3.2m investors hailing from every town and city. More than half of these people had started investing on the share market...
In December 2010, after a steep decline in the value of shares on the stock exchange's general index, known as the DGEN, investors took to the streets. The crash in share prices was probably triggered by an attempt on the part of Bangladesh's central bank to restrict the private banks' exposure to the exchange.
On January 9th 2011, investors again fought running battles with the police after the DGEN's shares fell a further 7.8%. When the stockmarket went into free fall the day after — with the DGEN shares losing 9.3% of their value in just the first 50 minutes of selling—the country's Securities and Exchange Commission shut down the exchange. As protester Mukul Ahmed commented, he had lost $3,000 over three weeks. He had invested all the money he'd saved — about $7,500 — during his four years as a government official.
Institutions do not bear all of the blame however. The most
pressing question is whether Bangladesh's teeming millions of new
individual investors have learnt their lesson. For too many the
stockmarket had become a route to easy money—in many cases it even
seemed to provide a way to avoid working a job. The violent
street scenes expressed these investors' frustration at learning that
putting money on the stockmarket involves risk.
Unlucky investors should have learnt it was also possible to make money when prices decline. It is a great example for authorities of any country, though, which show that financial illiteracy has to be fought and prevented on a national level.
