"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 investing, can worsen the losses during a market downturn. For those engaging in direct stock investments, it is advisable to diversify and invest gradually for the long term within 30–50% of your financial assets."

Jinwoong Kim, a research fellow at NH Investment & Securities 100-Year Life Research Institute, highlighted the risks of individual investors’ short-term profit-seeking in the recent highly volatile market during an interview with The Asia Business Daily.

Kim pointed out, "The most common mistake individual investors make is aiming for large returns in a short period." He cautioned, "Although younger generations have many opportunities to earn sufficient returns through long-term investing, they may focus borrowed funds or lump sums in coins or thematic stocks, pursuing high-volatility investments that could ultimately deprive them of recovery opportunities."

He advised, "Investors should make contributions using surplus funds and diversify their portfolios across domestic and overseas stocks and exchange-traded funds (ETFs)." He added, "Rather than seeing the recent market decline as a failure, use it as an opportunity for buying at low prices and for long-term compound investing."

He also warned against middle-aged and older investors tapping into their retirement savings, insurance, or pension funds to invest in risky assets. Kim emphasized, "Using funds with a predetermined usage date for investment is essentially making a choice that increases your own risk of investment failure." He stressed, "It is not desirable for middle-aged and older investors close to retirement to allocate too large a portion of living expenses or retirement funds expected to be used soon into investments."

He advised that investors should devise time-diversification strategies according to the nature of each asset. "First, any funds needed within three to five years should be allocated to predictable financial products, such as deposits, to ensure safety," he said. "For funds to be used further in the future, it is better to seek appropriate returns using asset allocation investment products such as target date funds (TDFs)."

He also stated that individuals should prepare in advance for retirement with the three-pillar pension system (National Pension, Retirement Pension, Private Pension). Kim explained, "For office workers, simply preparing all three types of pensions over the long term can build up a meaningful amount of retirement assets," and "From the start of economic activity, a certain percentage of income should consistently be contributed to pensions."

He added, "From your fifties until right before retirement, the ideal asset allocation is 50% financial assets out of total assets, 50% of those financial assets in investment assets like stocks, 50% of investment assets in overseas investments, and around 30% of total assets in pension assets. Remember this as the 5553 rule."

He further emphasized that covering post-retirement living expenses with pensions is the best approach. He explained, "Retirement pensions, individual retirement pensions (IRP), and pension savings are all essential financial products to prepare for old age," and "For a more stable and affluent retirement lifestyle, any gaps left by the National Pension should be filled with retirement and private pensions."

He noted that after retirement, managing cash flow to ensure living expenses are met is more important than trying to increase assets. He recommended first checking whether monthly living costs can be covered by the National Pension, retirement pension, and private pension, and to cover any shortfall through income investing in deposits, bonds, or dividend-paying assets.

Kim advised, "For post-retirement living expenses covering three to five years, secure these funds in safe assets. To counter risks such as inflation and longevity, it is wise to diversify a portion into TDFs or domestic and international ETFs to seek some return. Large one-off expenses, such as medical and nursing care costs, should be prepared for with insurance. Also, you must plan in advance the withdrawal order for each asset and your pension receipt schedule."

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