"Chasing Big Gains in Stocks Leads to Ruin... Diversification and Long-Term Investing Are the Key to Survival"

"Believe in the Magic of Long-Term Compound Growth, Follow Asset Allocation Principles"

Interview with Jinwoong Kim, Research Fellow at NH Investment & Securities 100-Year Life Research Institute

Watch on The Asia Business Daily YouTube Chan

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"Short-term profit-seeking behaviors, such as leveraged investments, can amplify losses during market downturns. If you plan to invest directly in stocks, it is advisable to allocate only 30 to 50 percent of your financial assets and practice diversification and long-term, regular investment."

Jinwoong Kim, a research fellow at the 100-Year Life Research Center at NH Investment & Securities, highlighted the risks associated with short-term profit-seeking by retail investors in a recent interview with The Asia Business Daily regarding the recent heightened volatility in stock markets.

He warned, "The most common mistake individual investors make is seeking large returns in a short period of time. Although younger generations have plenty of opportunities to generate sufficient returns through long-term investments, they often borrow or concentrate their funds in coins or theme stocks, aiming for high-volatility investments, which could ultimately mean losing the chance to recover from losses."

He added, "Investors should always invest surplus funds in a diversified way, both domestically and internationally, into stocks and ETFs through regular, systematic investing. Instead of viewing the recent market downturn as a failure, use it as an opportunity for value investing and long-term compounding returns."

He also cautioned against middle-aged and older investors withdrawing their retirement funds, such as severance pay, insurance, or pension assets, to invest in risky assets. Kim emphasized, "Allocating funds that are scheduled for use to investments only increases the likelihood of investment failure. It is not desirable for middle-aged and older individuals close to retirement to invest an excessive portion of soon-to-be-used living expenses or retirement funds."

He advised that a time-diversified strategy should be established according to the nature of assets. "First, money set for use within three to five years should be allocated to predictable financial products such as deposits to secure stability. Funds intended for the distant future should be invested in asset allocation financial investment products, such as Target Date Funds (TDFs), to seek appropriate returns," he added.

He also recommended preparing in advance for retirement by establishing the three-tier pension system (National Pension, Retirement Pension, and Private Pension). Kim stated, "If you are employed, you can build up a significant amount of pension assets over time simply by steadily preparing these three pension tiers. From the beginning of your working life, make sure to consistently allocate a set percentage of your income into pension savings."

He added, "From your 50s up to right before retirement, it is ideal to maintain the following proportions: 50 percent of your total assets as financial assets; within your financial assets, 50 percent in investment assets such as stocks; within your investment assets, 50 percent in overseas investment assets; and about 30 percent of your total assets in pension assets. Remember this as the '5553 rule.'

He also emphasized that the best way to cover living expenses in retirement is through pensions. He further pointed out that "retirement pensions, individual retirement pensions (IRPs), and pension savings—all forms of personal pensions—are essential financial instruments for retirement. Those who seek a more stable and affluent retirement should supplement any gaps in National Pension coverage with retirement and private pensions."

After retirement, he stressed the importance of maintaining steady cash flow rather than focusing solely on asset growth, to ensure there are no interruptions in meeting living expenses. He suggested first checking whether your monthly living costs can be covered by the National Pension, retirement pension, and private pensions, and, if there's a shortfall, to cover it through income-generating assets such as deposits, bonds, and dividend-yielding assets.

Kim advised, "Secure three to five years' worth of living expenses after retirement in safe assets, but to address inflation risk and the risk of longevity, invest a portion in TDFs or domestic and international ETFs to seek moderate returns. Set aside insurance to prepare for significant medical and long-term care costs, and establish in advance a withdrawal strategy by asset type and your pension payment plan."

This content was produced with the assistance of AI translation services.