Stock Investment Failure in Korea

A stock expert who is famous with the stock craze in Korea says that it is very encouraging for young people to invest in the stock market. However, Korea’s stock investment became a breakthrough due to various desperate feelings. Frequently checking stocks and stock prices and expecting a jackpot is highly likely to lead to speculation (gambling) rather than investment.

Experts recommend investing in the Korean stock market rather than investing in foreign companies. The reason for the recommendation is “Why do you invest in the child next door? It is wise to invest in your own children.” says a plausible explanation. A private investor asks. “Hasn’t the Korean stock market been performing poorly for a long time?” The answer is explained as ‘the investor’s fault that the stock market did not grow because Korean investors did not invest in Korea’.

The reason individual investors invest in the stock market is to make a profit, not to increase the size of the stock market. The U.S. stock market will return 27% in 2021. The Korean stock market closed at 3.6%. I am not referring to the results of just one year. The U.S. stock market has averaged over 15% annually over the past 12 years.

“Isn’t it possible to invest in a company that has grown significantly, such as Samsung, but is failing?” and individual investors ask. Experts rather ask why they are pessimistic about investment. This is not because of pessimism, but because of the investment risk investors are concerned about. In the United States, countless companies go bankrupt every year. However, experts say it is more difficult to select a company that is failing.

Korea’s stock market is only 2% of the world’s. Diversification is the foundation of investing properly. Investing in the Korean 2% stock market and investing in a few companies is a so-called ‘investment’, and it can be said that such an investment is a very risky investment. The US stock market occupies 56% of the world, and it can be said that investments made up of 500 companies have much less risk than Korea.

Experts say that if you select a promising company for the future and invest in it for a long time, it will grow into big money. And since the investing company is a business partner, it is said that the company must determine the company’s management policy, manager’s attitude, competitors, business report, strategy, market dominance, profitability, balance sheet, debt ratio, etc. It’s like a dream that hardly ever comes true.

It is said that one should listen to the CEO of Tesla’s “Battery Day” all night long. It is said that only then can the company’s management policies be judged, but it is difficult for ordinary investors as well as so-called stock experts to do it.

When the U.S. company Quibi was founded, it received an investment of about 2 trillion won in a very short period of time. Co-founder Kattenberg was the founder of DreamWorks, which produced ‘Shrek’ and ‘Madagascar’, and Whitman was the CEO of eBay and HP. In a keynote speech at CES 2020, the two announced a promising leap forward for the company. However, after six months, ‘Quivi’, a company focused on video content, went out of business. Could an ordinary investor or securities expert have been able to predict the fate of a company after listening to management?

It is very difficult to predict what a company will do in the future. Even the managers themselves may not know. This is the reason why CEOs change frequently in American companies. Even if you visit a company, you cannot know the fate of the company. If there is any problem with the company, who will tell you this? Even if you know the facts, you may also know what kind of results will appear in the future.

Experts say that not only young people, but also housewives and children should set up a stock investment club and invest in stocks. It is worrying that the entire country will become a gambling house, and it is fearful that valuable assets as well as health may be lost through incorrect stock investment.

With proper investment, individuals must first build wealth for a family to live, when families survive, businesses can develop through consumption, and when businesses grow, the nation becomes prosperous.


Myung-Duk Lee, Ph.D., Registered Investment Adviser (RIA)

Copyrighted, Dr. Myung-Duk Lee’s Financial Column All rights reserved.

MI Asian Staff
Author: MI Asian Staff