Investment Tips for 2006

Kang Chang-hee, the head of Mirae Asset’s Investment Education Research Center, claims that stock investment is essential in preparing for post-retirement when the interest rates remain low. However, he cautioned the following four points in order not to turn investments into speculations.

First, bear in mind that investments entail risk. Second, diversify long-term investments to reduce risk. Third, make investment plans that suit your life goals. Fourth, focus on your work and let the experts manage your assets. If you do not invest in your life and just concentrate on building your assets you are sure to fail both in life and investment.

According to Oh Jong-yoon, a certified financial planner at Korea Financial Planning, the first step in making investments is to “diagnose your financial state.” This means listing your assets such as apartments, land, savings, stock, bond, or debts and figuring out the proportion of each type of asset.

The next thing to do is to find out the expected return on each item and see whether or not you have invested in low-return assets. After that, get some help from experts or financial state diagnosis programs. You have to invest according to your aim, be it buying a house or preparing for retirement.

Park Chul, the head of Kookmin Bank’s Research Center, advised parents to start teaching children about basic economy. He said parents and children must have an “open discussion about money.”

Those who have discussed money issues with their parents since young are more likely to have better control over money.

How to invest in stocks-

President Woo Jae-ryong of Korea Fund Research advised investors to lower the risk of subscribing to accumulative funds by diversifying investments. He stressed that focusing investments into high-yield funds or asset management firms is dangerous, and that it is best to put more than 50 percent of total assets into ordinary blue chip funds rather than value investment funds or dividend investment funds.

He added that when the stock price plunges, investors should not stop investing in accumulative funds, but rather invest more in them. As accumulative funds are suitable for long-term investments, falling stock prices mean chances to buy stock cheap.

The head of the Research Center at Daishin Securities, Kim Young-ik, said timing is what matters the most in all investments. For stock investments, 70 percent of the importance lies in buying and selling timing, 20 percent in category selection, and the remaining 10 percent in stock selection.

Predicting stock prices to rise in the first quarter and then adjusting in the following two quarters, he advised investors to lower their proportion of stock investments before the second quarter and raise it again in the third quarter after looking at leading economic indicators.

Where to get investment advice-

“Pay attention to newspaper articles in the business section. Articles on company production are especially valuable sources of information,” said president Park Jung-gu of Value Investing Advisors

His recommendation was not referring to the stock pages of business papers but the business sections of daily newspapers where you can get the big picture of economic trends.

Lee Jong-woo, the head of Research Center at Hanwha Securities, recommended books on economic history. He said although investment environment and regulations change with time, their basic structure stays similar.

“Every boom and recession has an end. You can learn which development phases current advanced countries went through, and which industries have gone through their rise and fall,” he added.

Lee Che-won, the head of the Asset Management Team at Korea Investment Securities advised to carefully look at listed companies’ investment manuals. While individual investors are looking for big information, most of the needed information can be found in the manual.

A taxation expert, Ryu Woo-hong, who is the head of Woori Bank’s private banking department, said to look at other people to learn from them. “Follow people who have made money from investments, or experts. If they are unavailable around you, try to contact people introduced in the media in person or via e-mail to get some advice,” he said.