[VIEWPOINT]Long-term investments benefit allA few weeks ago, on the day the Korea Stock Exchange Index fell below 600, I was having dinner with a Korean executive. He didn't look well, so I asked what was wrong. He said that his stocks had fallen drastically.
I asked when he purchased them, and he said about six months ago. I continued with my questions, asking if his investments were long-term investments that could be set aside for more than three years, and if he had made the investment with a five- or 10-year horizon in mind.
I said if the investments were long term, then brief short-term falls should not be of concern.
I wasn't saying this to make him feel better, but because I am confident about the future of the Korean economy.
If we look at Korea's economic development over the past 30 or 40 years, then we see it is an attractive, long-term market for investment. This is also true when we look at the technology and the potential that Korean companies and Koreans have.
World-renowned economic research institutes and think tanks forecast the potential of Northeast Asia to be very high. And since Korea is evaluated as the most dynamic and promising country among these nations, it is naturally a wise decision to invest in Korea for the next 10, 20 or 30 years.
It is surprising to see how Koreans can be less confident about the future of Korea or Korean companies than foreigners. Some Koreans don't even believe it when financial experts and CEOs of leading international companies talk positively about the Korean economy or say that Korean stock prices are undervalued.
These people are pros who keep a very close eye on the flow of global markets. Not only do they think twice before speaking, but they don't speak at all when they aren't confident. So why do Koreans doubt their opinion? I believe the difference is in how we define "long term."
Koreans around me seem to consider one- and two-year investments as long-term. It is difficult to find people who make investments thinking three to five years ahead. Most Korean investors reflect the ppalli, ppalli (fast, fast) characteristic of Koreans and engage in very short-term investments, looking to cash in whenever there is an opportunity for speedy return.
Frequent transactions like these only increase revenues for securities companies, and are not beneficial for the individual investors or the companies that are being traded.
Most foreigners consider long-term investments to be at least five years and up to 10 or 20 years.
A friend of mine who is CEO of a foreign company bought stock in a Korean company five years ago. Since then, its price has increased more than tenfold.
When I asked him a few days ago if he still holds the stock, he said he will hold them for a long time. He added that he will keep the shares even when he leaves Korea and until he retires.
He said the stock was a long-term investment, and what he meant by "long-term" was 20 years. He said that is why he isn't affected by changes in the economic situation or a temporary rise or fall in stock prices. My friend, of course, strongly believes in the company he invested in as well as in "Korea, the Corporation."
He says that investors must focus on discovering companies that are worth investing in for 10 or 20 years, rather than focus on the daily fall or rise of stock prices.
Investments made with long-term vision provide an opportunity for stable growth, not only for investors but companies, as well. Those investments ultimately benefit the future of the Korean economy.
There is no right answer when it comes to investing.
However, I must emphasize the advantages and benefits of long-term investing whenever I see stock prices rise and fall in Korea. I say this because I truly believe in the future of Korea, the Corporation.
* The writer is the CEO of Alliantz Life in Korea.
by Michel Campeanu