Sage stock tips

Kim Dong-ho
The author is a columnist of the JoongAng Ilbo.

Stock fads are all over the world. Optimism and pessimism are mixed. Some warn of the bubble bursting, while others advise now is the best time to buy stock. No one can know where stock prices are headed. The fever has led many to join the wave by spending everything one has or dig into loans and beyond means to invest in the latest thing without experience or studies of corporate potentials amid the movement of FIRE (Financial Independence, Retire Early) or the phenomenon of FOMO (Fear of Missing Out).

So, what’s in store for the novices who have jumped on the retail investment bandwagon on the Korea Exchange? There is no answer, but investor guru Park Hyeon-joo, chairman of Mirae Asset Financial Group, offers some guidance through his YouTube channel. He lectures on the big picture on stock investment.

First, he advises looking at industry trends more than a certain stocks. One can err in picking a stock, and predicting the price movement is impossible. Second, it is meaningless to fret over the benchmark. The Kospi at 3000 is merely symbolic. Third, parking money in a blue chip for a long time is the best strategy. One might consider setting aside 20 percent of monthly salary for stock investment. Fourth, it is important to keep to the principle of avoiding checking the stock price frequently and instead studying the trend. A short-term swing is not important. Fifth, he too cannot recommend what stocks to buy.

His five-points are nothing enlightening. But a common thread runs through it. Individual stock investors can never prevail in stock investment. As a corporation is a moving organism, its value can change anytime. If one wants to invest, Park advises putting money in exchange-traded funds (ETF), which is a type of investment fund that trades on the stock exchange and can be bought or sold at any time. For instance, a type of ETF pools money in only battery stocks or enterprises with commitments to the ESG (Environmental, Social and Governance) criteria. Through the ETF, an investor is putting money in the industry instead of a certain company. Since a trend tends to persist, long-term investment is advisable. Park praised ETFs as one of the greatest inventions.

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Another tip is to “read a lot, stay modest with open-mindedness and build expertise. Most of all, work with passion.” Park is advising not to devote all the attention and resources to stocks. The seasoned investor says few have succeeded from over-preoccupation with stock investment. Other investment pundits and experts share his advice, including Kang Chang-hee, CEO of the Korean Pension Forum under the Truston Asset Management and an expert on senior pension.

On Wall Street, there has been much hype over the retail triumph over hedge funds for their outsized short bet on video game retailer GameStop. Their spectacular win versus the Goliath institutions, however, lasted no more than a week as short sales filtering out an overrated stock. The short-selling system had been monopolized by institutional capital since its introduction in the U.S. in 1830. In fact, retail investors became helpless in the face of short-sale offensives from institutional players. Hedge funds are suspected of having exploiting retail investment patterns this time as well. The U.S. Securities and Exchange Commission is also looking into the affair. If irregularities are found in hedge funds, they would be punished.

The GameStop affair has bared the essence of the stock mania. Neither big hedge funds nor small investors can beat the market. Park lost big with his China-focused Insight Fund launched in 2007 amidst the 2008-2009 global financial crisis. Even when short selling is restricted and retail investors unite to take on institutional short sales, stocks cannot be defended in that way. Stock prices are determined by corporate performance and labor behind it. As Chairman Park advises, devote time to your job with passion. Stocks come next.