Dr. Hong Chun-uk: "The Core of Asset Management is Loss Defense and Asset Allocation... Start with an ISA Account"

For the investment principles toward economic freedom, 'loss defense' and 'asset allocation' were emphasized. Economist Dr. Hong Chun-uk appeared on the YouTube channel 'Hong Chun-uk's Economics Lecture Notes' recently to share his asset formation process and investment philosophy.

"Avoid 25% Loss Based on Bear Markets... Preparing for Crises is the Key to Investment"

Dr. Hong cited the 2008 global financial crisis as a turning point in his asset management. He stated that while working as an economic analyst in the dealing room of KB Kookmin Bank at that time, he experienced the importance of safe-haven assets such as US dollar-denominated government bonds and gold. From 2008 to 2018, for about 10 years, he managed his assets using dollar assets and global currency diversification strategies.

The most important investment principle he emphasized is 'investing without losing,' quoting a maxim from Warren Buffett. Dr. Hong explained, "Even taking transaction costs into account, it is important not to suffer a loss of about 25%, which serves as the standard for a bear market," adding, "When investments that do not incur losses accumulate, the compound interest effect appears." Furthermore, mentioning past external shocks such as the 2008 real estate collapse, the 2011 dollar credibility crisis, the 2020 COVID-19, and the 2022 Ukraine war, he added, "Investment becomes easier if you think about whether you are prepared when a crisis comes."

"Theme ETFs are Not Diversified Investment... Utilizing Tax-Saving Accounts is Essential"

Regarding asset allocation strategies, he pointed out the structural problems of the domestic ETF market. Using 'theme ETFs' that concentrate on specific sectors such as batteries, bio, and aerospace, which are currently popular, as examples, Dr. Hong drew a line, saying, "Concentrating on specific stocks or sectors is not diversified investment." He warned, "True diversified investment is dividing and holding completely different types of assets such as real estate, stocks, bonds, and gold," and "Holding various sectors within the South Korean stock market is ultimately the same as putting all your eggs in South Korean stocks."

The importance of account selection for efficient asset management was also mentioned. Dr. Hong recommended utilizing tax-saving accounts, citing the burden of taxes and health insurance premiums he experienced during the process of withdrawing retirement pay in the past. He advised beginners to "It is best to start with an ISA (Individual Savings Account) first," and "I recommend the order of expanding the scope to personal pension or IRP accounts afterward." Additionally, he suggested utilizing low-fee ETFs when investing in overseas assets and simultaneously studying exchange rates to prepare for currency fluctuations.