Challenges of Individual Stock Investment in Korea

Investing in individual stocks in Korea is challenging, prompting a preference for real estate or foreign markets.

### Challenges of Investing in Individual Stocks in Korea: A Candid Perspective
* 📉 Economist Hong Chun-wook expresses his belief that investing in individual stocks in Korea is particularly difficult, especially due to his **negative view on value investing**.
* 🏠 He recommends that investors consider real estate over stocks when investing domestically, as he feels this strategy is **more reliable**.
* 💔 The lack of stability in individual stocks is highlighted, noting that prices often **surge only in response to favorable news**, making it hard for investors to **predict movements**.
* 📊 Hong criticizes the value-up index for including companies with **past scandals** and suggests that many stocks listed do not genuinely require **value increases**.
* 🔍 He points out the **frustrating nature of the exchange** and the **lack of trust in the system**, citing specific instances where **stock performance did not align with expectations**.
* 💰 Despite the challenges, he notes that after rebalancing investments in undervalued stocks, there have been **significant returns**, particularly in **U.S. stocks**.
* ⚠ Hong advises caution regarding leveraged ETFs and active funds, emphasizing the **difficulty fund managers face in outperforming the market average**.
* 🔮 Finally, he expresses concerns about future economic conditions, including potential risks associated with **U.S. politics and interest rate changes**, while suggesting **gold as a hedge against uncertainty**.

Throughout this year, I have been expressing two main points. First, investing in individual stocks is really difficult, especially since I have a very negative view on value investing. Second, if you are going to invest in our country, real estate is better than stocks. I believe these two opinions still hold true. It’s sad, isn’t it? Why is it so hard to invest in individual stocks in our country? Hello, I am economist Hong Chun-wook. Today, I would like to discuss the difficulties of investing in individual stocks in Korea. 

It seems that our country continues to lag behind the United States. Throughout this year, I have been emphasizing that investing in individual stocks in the Korean market is really challenging. I have a very negative perspective on value investing, and that sentiment seems to persist. Therefore, if you are going to invest, my recommendation has been to consider American or Chinese stocks instead.

It seems that if we're going to invest in our country, real estate is better than stocks. These are my two opinions, and I believe they are correct so far. It's sad, though. Why is it so difficult for individual stocks in our country? When I think about it, there are just too many obstacles. People often stumble and fall over the stones while trying to run hard. Additionally, as we've seen recently with companies like Korea Zinc, when an M&A event occurs, the prices can suddenly surge. Individual stocks in our country lack stability; they tend to remain dormant until a favorable news or theme arises, and then suddenly something triggers a spike. If we could predict these surging stocks or lottery stocks in advance and invest in them, that would be fantastic. However, if that's not possible, perhaps we should consider investing in the entire market instead.

And one more thing to mention is that we should stay away from policy theme ETFs. In the past, there were stocks that were influenced by themes like small and medium-sized enterprises or green growth, which were dominant under previous governments. But after that, did anyone really make money? Of course, those who think about day trading can do as they please, but I personally don't have the ability to day trade. I need to sell at the peak, but I can't seem to do that. So, as an economist, I can guess the direction a bit, but I can't catch the timing. Therefore, I hope we don't focus on value-up themes these days. There are 33 stocks in the value-up index of the KOSDAQ, but are there really that many companies that need to increase their value? I think that after things like telecommunications, cosmetics, and banks have all dropped, value has...

Finding companies that need to be upgraded is not easy. Secondly, there is a problem with the value-up index: it seems that there are too many companies that have had past scandals or belong to chaebols. I worked at KB Bank, and before that, I was the head of the investment strategy team at Hanwha and Shinhan Asset Management. I also have over ten years of experience in asset management, including with the National Pension Service. Throughout that process, there were several times when I thought, I will never invest in these owners' groups again. Yet, they are still all included in the index. I have no idea what the criteria are. The third and bigger problem is that I find the exchange frustrating. What I mean is that from the day the value-up index is created, KB Financial Group's stock plummeted, but the announcement was made after the market closed that day.

It's strange, isn't it? There seems to be a lack of trust, and I feel that there should be fair opportunities provided, but that's not the case. The money being spent and the lists being presented are also odd. Looking back at the past governments and the theme ETFs, it's been quite difficult. When considering these three aspects, it’s not easy to invest in themes that are being pushed in the information. I admire the courage of those who boldly invest in various stocks, but I cannot empathize with them. The South Korean stock market has never had a good performance when the U.S. lowers interest rates. Typically, a rate cut would be a positive sign, but since 1995, all five instances of rate cuts have turned out to be negative in the short term. It feels like we keep stumbling over the same obstacles. Because of these factors, times when interest rates are not lowered and are instead held steady tend to be quite favorable, while times of rate cuts are generally challenging.

The difficulty of investing has increased a bit, and I believe that. As you can see from the introduction I posted on our blog about our Prism clients, after going through the tough month of August, we find ourselves near the historical highest levels of returns. Why is that? There are cash-equivalent assets, and elections in the US and Korea have been quite favorable lately. On August 5th, the day after, on August 6th, we did some rebalancing. The undervalued stocks, which had dropped by 10%, became very cheap. So, we sold some gold and bonds that had risen in price and bought Korean and US stocks at a low price. Although Korean stocks haven't increased by 10% yet, US stocks have risen significantly. This way, we can protect ourselves in our investments, especially in individual stocks.

Those who have the ability to pick stocks and sell at high points do not need to worry about asset allocation. I just bought the entire market, and even though I did that, if a panic occurs, I think it would be less stressful to respond by selling some profitable assets and buying at lower prices. Please, those who can handle individual stocks can do that, but the viewers of my YouTube channel might find it a bit tough, which is why they are watching me. They probably realize that this is really difficult and acknowledge that it is a challenging endeavor. I hope they can invest with a bit more peace of mind. For now, I'm worried about whether Trump will become president again, and I also don't understand why the Federal Reserve lowered interest rates by 0.5. It seems fine, but I wonder why they are being so aggressive with the cuts.

Ultimately, it seems that the U.S. is considering lowering interest rates. If the next president is Trump, there could be various risks associated with war and other issues. It seems that gold is a good option for mitigating these two risks, which is why interest in gold is high. However, I've been a gold investor for a while now, and I always mention that I was the one who suggested buying gold and government bonds since July. In the last couple of months, the prices have skyrocketed. As I mentioned earlier, I sold gold to buy stocks. So, I'm not saying to buy gold right now; that opportunity has already passed. While I can explain why gold is rising, I want to advise caution about whether it will continue to rise in the future. ETFs that track indices are not particularly difficult to invest in, but the problem in our country is that even institutions...

I'm currently scratching off lottery tickets, and I really hope that people will refrain from using leverage incorrectly. It's important to avoid leveraged ETFs. Secondly, regarding active funds, it's quite difficult for fund managers to generate returns that exceed the market average with equity funds. So, I believe we should avoid investing in ETFs that require fund managers to select stocks. Lastly, I also think we should steer clear of H funds. Anyway, this is Dr. Hong, back from the Chuseok holiday with a more cantankerous attitude. Thank you all for listening so attentively.

"저는 개별종목에 투자하지 않습니다" 홍춘욱 박사의 ETF 투자 전략

"환율의 미래"와 "프랑스 탐방기" 등 10여권의 책을 쓴, 이코노미스트 홍춘욱입니다. 25년 넘게 이코노미스트 일을 하면서, 반복되는 질문에 답하느라 힘들었는데.. 동영상을 통해 자주 묻는 질문에 대해 쉽게 답하고자 합니다.


*비지니스문의 : hong8706@us-all.co.kr
*강연 문의: https://c11.kr/19l7h


홍춘욱의 경제강의노트

Challenges of Investing in Individual Stocks in Korea

Investing in individual stocks in Korea is difficult, with a negative view on value investing persisting.

The market lacks stability, with prices surging only after favorable news or events.

The speaker recommends considering American or Chinese stocks and investing in real estate instead, while advising against policy theme ETFs and focusing on value-up themes.

Challenges in Upgrading Companies and Investing

Finding companies in need of upgrades is difficult, with many having past scandals or belonging to chaebols.

The value-up index's criteria are unclear, and the stock market's reaction to its creation has been frustrating.

The South Korean stock market has consistently struggled after U.

interest rate cuts, making it challenging to invest in the promoted themes.

Investing has become more difficult, but returns are near historical highs due to favorable cash-equivalent assets and recent elections.

A strategic rebalancing on August 6th, selling gold and bonds to buy undervalued Korean and US stocks, has proven beneficial.

The speaker emphasizes the importance of individual stock picking and asset allocation, while also expressing concern about Trump's potential presidency and the Federal Reserve's aggressive interest rate cuts.

is considering lowering interest rates, with potential risks associated with a Trump presidency.

Gold is in high demand for mitigating these risks, but the opportunity to invest has already passed.

Caution is advised for future gold price movements, and it's important to avoid leveraged ETFs and actively managed funds for better investment outcomes.