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Some argue that individual investors are better off steadily buying exchange-traded funds (ETFs) that track major U.S. indexes rather than buying and selling individual stocks.

Writer Kim Jihoon (Pomeppokko), author of Retire with Just Three U.S. ETFs, appeared on the YouTube channel "Money in the Trap" on October 18 and shared this investment principle. Kim has invested in U.S. ETFs since 2019 while holding a regular job. He published a book about how he grew his initial assets of 300 million won fivefold in five years.

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The "three ETFs" Kim recommends are an ETF tracking the S&P 500 index, which invests in 500 large U.S. companies; the Nasdaq-100 index ETF (QQQ), focused on technology stocks; and SCHD, which invests in dividend-paying stocks. The portfolio is built on returns from U.S. economic growth, adds growth through technology stocks, and bolsters stability with dividends.

Kim cited the performance of accounts he had managed himself as the basis for recommending index investing. Describing the results of testing investment strategies across about 30 accounts, he said, "The fractional-share accounts that automatically bought stocks in regular installments every day without doing anything performed best, outperforming the accounts where I studied the market and reacted to it." In other words, accounts that mechanically bought the same amount every day did better than those in which he tried to time the market. He added, "With individual stocks, you have to worry about when to buy and sell, but with index investing, the longer you hold, the more time is on your side."

He also explained why he favors the U.S. stock market. Kim noted that Korean workers' assets are concentrated in real estate and the won, and said the domestic market is structured in a way that makes it difficult for individual investors to respond because information is not evenly distributed and the market lacks transparency. "The Korean stock market has already become a 'meme stock market' to the point that stocks related to a news story about a shark sighting can surge, and the severe information imbalance makes it easy for individual investors to lose money," he said.

He also cited the excessive number of listed companies relative to the size of the market as a problem. "The domestic stock market is only about 3% the size of the U.S. market, but the number of listed companies is more than 50% of the U.S. total," Kim said, criticizing companies for having focused solely on expanding their size through practices such as splitting off subsidiaries and listing them separately.

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A view of the New York Stock Exchange in New York, U.S. AP-Yonhap News

He also addressed the currency risk of investing only in won-denominated assets. "Although Turkish stocks soared over the past 10 years, their annualized return in U.S. dollar terms was only 1.1%," he said, arguing that performance should not be judged solely by how much a country's stock market has risen. He went on to stress that money that cannot afford to be lost, such as retirement savings, should be invested in the U.S. market. "If you were diagnosed with cancer, would you go to a neighborhood clinic or the biggest hospital?" he asked. "If an asset absolutely has to be preserved, it should be put into the largest and most transparent market, the U.S. market."

In response to concerns that "the U.S. stock market is already at a high," he urged investors to take a long-term view. "Even if you had bought at the peak of the dot-com bubble, that would look like an incredibly low point by today's standards," he said. "There's no need to assume in advance that an index that has been rising for a long time has peaked." He also described a rebalancing strategy—adjusting asset allocations—in which investors increase the share of leveraged ETFs when an index falls by 10% or more to lower their average purchase price. He added, "The emotional toll of being unable to sell when prices fall because you want to break even, and being unable to sell when prices rise because you think they might go even higher, is itself a major loss in the investment process." 

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