Hello, everyone. It's been a while since I last greeted you. This is the most realistic investment guide for those feeling lost in their investments. Today, I will be with you again. I'm Jinwoo Lee, and hello, Changkyu Choi. 

I'm very grateful for the love and support you've shown us, and I want to produce more content. However, our producer and new guest are quite busy, so we haven't been able to film as often as I'd like. 

Today, I'm going to introduce one of those busy individuals. We initially thought of inviting him only as a special guest, but many viewers have been asking, Why isn't he appearing? If he doesn't come, I won't watch. Due to the overwhelming comments, we had no choice but to invite him again today, even though he is busy during trading hours. Please welcome Manager Jang Duwik! 

Hello, everyone. I'm Duwik Jang. It's nice to meet you. We are always working hard on our soccer investments, saving diligently, and striving to become great people.

Alright, instead of discussing generalities, let’s get into specifics about what to invest in and the pros and cons of those investments. I believe I should share some realistic financial know-how. If we’re not going to do that, there’s really no point in us meeting, right? So, let's start with that concept today.

The first story is from a 30-something office worker who has been consistently investing in stocks. On August 5th, when stock prices experienced a historic plunge, everyone remembers that day, right? I also did nothing, but stock prices fell anywhere from -5% to -20% per stock, which made my already struggling account plummet even further. In just half a day, more than double my salary evaporated into thin air. I still can’t forget the fear of that day. Although prices did rebound the next day, I’ve been questioning whether investing in such a risky environment is the right choice.

I thought about it. There's no guarantee that such an event won't happen again, and in this uncertain situation, is it really right to continue investing in the same way? I've been investing for a while, but I think I need some sort of safety net. In the morning, when I go to work, my routine involves organizing the previous day's U.S. market situation and summarizing any noteworthy events during the trading day. On that particular day, I took a photo of my terminal because I felt it was something I needed to remember. I thought to myself, I really need to keep this in mind. Why do I need to remember it? Because in 2001, there was the 9/11 terrorist attack. Honestly, it felt even worse than that time. Why? Because back then, we understood that a terrorist event had occurred, and there was a geopolitical risk, so a drop like this was somewhat understandable, even if it was significant.

I was able to explain the reasons for the drop and such things. On that day, I couldn't find a proper reason, but it just fell. That's right, I couldn't find a reason, and Manager Jang Dong told me something. There was mechanical selling; in fact, machines did sell. System trading has recently spread a lot. So, what is system trading? Most institutional investors are not trading manually but have created systems for trading. When the price rises to a certain point, they set conditions to sell automatically. Because of the loss-cut clause, when that clause is triggered, it leads to automatic selling. So, machines that are devoid of any emotions end up selling. Additionally, it creates a situation where selling leads to more selling.

During the day, or even over the course of a single day, wasn't there a greater drop? It seems that when there are similar situations in the future, if the drop is significant, people will start selling more and more, leading to further declines. I often think that these occurrences are not just isolated to that day. Therefore, I believe that more people will seek a more comfortable investment approach or try to reduce their exposure to risks. The person who sent in their story seems to feel that investing is, surprisingly, risky and frightening. They might be thinking that some sort of buffer is necessary. Just earlier, Mr. Choi Chang-kyu mentioned the risks, but when viewed in the long term, this is really just a level of volatility. For instance, if there’s a 10% drop in a single day...

Well, investing should really be approached with a long-term perspective, like 10 or 20 years. In that sense, we can certainly endure this level of volatility. If I were to give some traditional advice, I would say let's invest in a way that allows us to feel comfortable. If we simply look at the market as it is, such occurrences are bound to happen from time to time, and they will continue to happen in the future. We can either accept that or find it too difficult on a personal level, especially when our accounts are affected. Therefore, we need to establish some safety measures. What could those be? I believe investing in a well-diversified portfolio that consistently generates dividends and has the potential for dividend growth is a very stable approach to handle this kind of volatility.

I think it could be a very useful tool to overcome growth challenges. However, dividend stocks aren't easy to come by. What if we just looked for everything and kept it all in cash? That doesn't work either. There is one thing I really want to convey to this person. Since you’ve definitely experienced investment failures, you might be thinking, as you just mentioned, about selling everything and just holding cash. But I still say, stay in the market. Why? Because if you stay in the market, opportunities to earn profits will come your way. Why do you need to stay in the investment market? Ultimately, I believe that in the long run, we have to overcome inflation rates. Yes, inflation rates. We often explain inflation using indicators like the CPI, and I looked into some recent data. For instance, in the case of the United States...

Over the past 30 to 40 years, the CPI has indeed increased fourfold. However, indices like the S&P 500 and Nasdaq have skyrocketed by 70 times. So please, it's very risky right now, and I feel uncomfortable. But stay in the market; we need to invest in assets that can beat inflation. Don't leave; cash is not the answer. 

Regarding the Black Monday in 1987, which is considered one of the largest single-day declines in history, the market dropped by about 20 to 30%. However, if you look at the entire year of 1987, the S&P 500 actually rose by around 5%. Although those days when the market dropped by 10% were incredibly painful, it is still right to remain in the market. I want to emphasize that point boldly. It was painful for me as well; even though I say this, my retirement account took a significant hit.

I was also very hurt when it broke. It's the same for the person who shared their story; they said they were also very hurt. The people in the market feel the same pain. But the problem is that if you try to escape when you are hurting, from that point on, recovery becomes impossible. In fact, I've seen many times that when the market rises, everyone is shocked and wants to pull out, but that's when the rebound is usually the strongest. If you're feeling hurt and reduce your portfolio to get out, you miss out on those gains. However, if you miss that opportunity, it's hard to catch up again. If the market goes down again, you might want to buy back in, but often it doesn't go down, and many end up missing out forever. That's why the other day, I mentioned that it's a market where those without patience give their money to those with patience. If you can't stand it and sell, you end up giving all your money away. I, myself, am someone who lacks patience.

I feel like they are a person with patience. Yes, well, despite the high volatility in the market on August 5th, I think that when someone invests a certain amount, they can secure cash flow. If they have the opportunity to reinvest that secured cash, I believe they will unknowingly develop patience. A concrete product that embodies that patience is what is commonly referred to as SHUD. Recently, it has been mentioned a lot in our country, and there has been significant investment in it. Personally, I also think it is a very good investment product or investment logic. The subtitles are being displayed here, right? Yes, there was already someone who knew about it and asked a question in this context, so let's read that person's story together and discuss it a bit.

Hello, I am a beginner investor who is currently investing in U.S. stock ETFs. Until now, I have been investing in the S&P 500 ETF, but I started to think that I might need dividend income for my retirement in the future. So, I began looking into SCHD, which is known for its good dividend growth rate. However, as I gather various information from YouTube, I find myself more confused. Could you please explain exactly what SCHD is? I see that it is quite often recommended, but I don't really understand it. 

By the way, as you can tell from the name, SCHD is an ETF created by Charles Schwab, and it was launched in 2011, so it already has a track record of over a decade. While preparing this content, I studied a bit about it. One of the ways I study is by watching YouTube. However, I was disappointed to see that many comparisons are made solely based on returns. For instance, while it may rise less when the market goes up, it also has its advantages.

Because it has fallen, this is a good thing. They explain it with this kind of logic, but I find it very frustrating. I believe that in order to understand what the management company intended when they created that ETF, and what philosophy they had in mind, as well as the distinctive features when constructing the portfolio, one needs to know the details. There are a few basic methodologies for this ETF. The fundamental one is whether it has paid dividends over the past ten years. Why is this important? Because people often look at the historical records of dividends. Has this company consistently paid dividends? Yes, I believe this is the foundation of trust. If it has paid dividends for ten years, there is a high likelihood that it will pay dividends again this year. This is the most representative criterion, so I will mention that first. And then, regarding market capitalization, how is the market capitalization determined?

We rank stocks that have a market capitalization of over $500 million and are not particularly liquid, especially among dividend stocks. We exclude those that are not liquid and rank them based on criteria such as return on equity, annual dividend yield, and dividend growth rate. After ranking them, we select 100 stocks to create an index, which serves as the foundation for the dividend ETF. One of the biggest issues with dividend ETFs is the sector concentration phenomenon. Companies that continuously pay dividends and require significant capital, like tech companies, inevitably get excluded. Therefore, in the case of this ETF, we have limited the sector weight to 25% to prevent excessive concentration in any one sector, resulting in a well-diversified ETF. It seems I've talked a lot about a particular stock, so regarding investments, I have...

If I may share my thoughts, that's why I came here. I would like to compare investing to farming. Currently, we all work for companies, so in a way, we are like farmers for those companies. However, at the same time, I hope we can also automate our efforts. I want to cultivate my own fields, purchase land, and through the yields from that land, pursue some form of economic freedom. In modern capitalist society, I believe that farming can best be compared to investing in strong companies. Therefore, the best way to invest in companies is, of course, to buy the stocks issued by them. However, it's not just about buying any stock; as we are discussing, it’s important to buy stocks of strong companies that are consistently growing.

Of course, we will start receiving dividends. Then, with those dividends, we will invest again, and gradually, our portfolio will grow little by little. By nurturing this portfolio, I hope that at some point, we will achieve financial freedom. Investing in stocks is like a farmer having to work the land; it is something that must be done. I firmly believe that it is essential. By purchasing good companies and investing over a long period to receive dividends, and then reinvesting those dividends, the value of the companies will also increase. I hope we can remain true to that essence. I also wish that those watching this broadcast can find even a little bit of help so that one day they can become wonderful individuals who achieve financial freedom.

Collecting dividend stocks may yield a slightly lower dividend yield, but I have also included some growth stocks and carefully balanced them. Therefore, the dividend yield is approximately 3% per year. Nevertheless, these are stocks that can rise in value over time. Is a 3% dividend yield reasonable? If you invest about 50 million won, that means you would receive 1.5 million won annually, and that amount can increase over time. That's correct. Additionally, if we look at the long-term inflation rate, it is about 2%, so this can beat inflation. This means that the dividends will be sufficient to counter inflation. Furthermore, the scale of the dividends tends to grow each year, which can positively impact the stock price as well. So, for Korean investors, it can be a bit like...

It has come to my attention that, as of 2023, the top stock purchased by domestic investors in the U.S. is indeed Tesla. It's not just some random stock; many of you are likely already aware of this. It's a contentious issue, but Thomas Piketty published a book titled Capital in the Twenty-First Century. This book discusses various topics, but one significant aspect is his analysis of historical income tax data from major developed countries, including the UK, the U.S., France, Japan, and Germany, from 1870 to 2010. 

When analyzing this data, it shows that the rate of return on capital has consistently outperformed economic growth rates. The return on capital is generally around 4 to 5%, while economic growth has hovered around 1 to 1.5%. If we reflect on economic growth, it can be equated to labor productivity.

As capitalism matures and deepens, we see this trend becoming more pronounced. Therefore, we need to become more capitalistic ourselves. The speed at which money makes money is faster. Indeed, the speed of earning money through labor is slower; we work daily, spend, and receive, but salaries do not increase exponentially. Meanwhile, the returns on capital, even if the rate of return is the same, continue to grow exponentially. This could be seen as an inevitable outcome. That's why Thomas Piketty concludes that the world is unfair and argues that we should impose higher taxes on capital. However, from that argument, we can realize that capital can be a highly profitable investment. One of the alternatives he mentions is the idea of Houdra, which has recently been experiencing significant volatility.

As it grows, what constitutes a well-diversified portfolio? So, we are now talking about OCD. What kinds of stocks are included? Since dividends are given as dividends, it would be troublesome if the stock price falls, so we tend to focus on companies that can maintain their stock price while providing stable dividends. I have read this philosophy. The secrets of the selected stocks in the portfolio are often discussed by investment gurus. Warren Buffett also says to invest in companies you understand well. Looking at the stocks in the portfolio, typical examples include Coca-Cola and Pepsi-Cola. Yes, and there are companies like Lockheed Martin and Texas Instruments, which have a certain degree of brand power. The brand is, in a way,

해자 역할을 하니까 어렵더라도 그런 데는 잘 되고, 네가 어떤 개인지는 대충 공부를 했고, 이렇게 올라가는 주식은 아니지만, 요렇게 올라가는 주식 중에 배당도 나름 괜찮고 해자도 있고 브랜드도 좀 있는 우리에게 익숙한 기업들을 주로 모아놓은 것이다. 그런데 이제 미 슈드, 미국의, 그거를 그대로 복사해서 한국에서 ETF를 똑같이 만들어 놓은 동일 지수를 쓴다고 표현을 하죠. 그런 것들이 좀 있죠. 네, 코덱스 미국 배당 다우존스 지수를 쓰기 때문에 미국에 상장되어 있는 슈드와 한국에 상장되어 있는 ETF는 동일하다고 보셔도 무방합니다. 그렇지만 제가 분석을 해봤어요. 종목별로 약간의 차이가 있더라고요. 뭐 예를 들어 큰 차이는 아니지만, 4.3%, 4.31% 들어가 있는 것은 아마 그 ETF 운영상에 리밸런싱 차이라고 생각을 하고 있어서 거의 무방하다고 보셔도 상관없고요. 가끔씩.

There are times when we add and remove stocks during rebalancing. We typically add and remove stocks about once a year, while adjusting the weights quarterly. Recently, there was a significant controversy regarding a particular stock, which was NVIDIA. It is usually listed among the top ten tech stocks, and its removal sparked a major debate, especially among domestic investors. Many questioned why such a company was excluded, leading to considerable discussion. However, I believe that recently, due to volatility in the market, tech companies' stock prices have fallen significantly. This has led to an increased emphasis on principles when creating indices, and rebalancing is done according to these principles, regardless of market conditions, reflecting their own philosophy.

I had thought about it, and now I see that investors in our country really like tech companies, especially those in the Nasdaq. When we talk about the U.S. index, we often refer to it as the Q. The overlap between that index and the S&P is about 6 to 7%, which is almost negligible. So, when I saw Broadcom drop recently, I was quite surprised. Ultimately, I think investing is about the standards and criteria you apply, as you mentioned earlier. The fact that we were able to gain the trust of investors was due to the strict application of those criteria. If I were the CEO of a company like Broadcom, I would have said, Don't let Broadcom drop this time! I was really surprised to see them maintain those standards. Isn't there a concern that tech stocks are somewhat underperforming right now? Right, that's one way to look at it.

It may be possible, but the problem is that there is now a lot of volatility. It is largely influenced by volatility, and now I need to receive money; in other words, I need cash flow. From that perspective, having something like SCHD, which can provide low volatility and cash flow to investors, can be a very good alternative in terms of portfolio diversification. I'm not saying we should all move in this direction, but if we leverage, we inevitably gravitate towards technology stocks. Therefore, it seems natural to keep a portion in SCHD to maintain balance. Recently, looking into sites in the U.S., there have been studies suggesting that combining SCHD with something like a Nasdaq ETF in a 70-30 ratio or similar strategies for building a portfolio is not a bad idea. There are many research results coming out supporting this. So, regarding SCHD ETFs in the Korean market...

You mentioned that there are ETFs to trade, right? Yes, yes, yes. So ultimately, it's the same as investing in U.S. stocks. There is no difference at all. Ah, but there is a difference. The biggest difference is that there could be a difference in taxes, which I will explain later. The second difference is in the distribution of dividends, which we refer to as distribution payments. The dates for these distributions are different. In the U.S., they are based on a quarterly schedule, so you receive payments once every quarter. In Korea, however, due to monthly dividends, payments are made every month. The standard date for distributions is usually the end of the month, around the 30th or 31st. For example, in the case of KODEX U.S. Dividend Dow Jones, the 15th is the standard date. Ah, Samsung, what's the difference? Well, it's a very significant difference. Whether it comes out on the 15th or the 30th, that is not the same. If someone holds both a monthly dividend ETF and KODEX U.S. Dividend, they would receive payments twice a month.

The day the distribution payment comes in is when the money arrives. We receive it once on the 15th and once on the 30th. So, we can use U.S. dividend Dow ETFs to receive distributions bi-weekly. These tips might be incredibly useful for retirees or those living off income. And the fees are low, which makes it advantageous for long-term investing. One of the reasons I mention this is because the fees are affordable. It's really a beautiful detail that we should be aware of. For Korean investors, this level of knowledge is basic. Now, for those who feel lost in investing, this was an investment guide. Today, we have reached the end, but are there any alternative options for investors who are shocked by the sudden increase in market volatility? Continuing like this might not be the best approach.

I had a question about feeling a bit anxious, and we talked for such a long time, but I learned that there is so much to learn. Next time, I would like to learn a bit more about SHUD. Having gone this far, is there really more to learn? Absolutely, there is an infinite amount! When we study, we should do it properly, right? Mr. Jang Do-ik is a very strict teacher. If you can't keep up, he will leave you behind. There's no other choice; we have to study what we need to. We will continue with SHUD next time. Let's wrap up here for today. Thank you for your hard work. I appreciate it. I look forward to seeing you next time.

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