Indiscriminate 'all-in' investing is risky; it's crucial to clearly distinguish the role of money and build asset income from a long-term perspective.
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Professor Ahn Yu-hwa explains that investment and human life operate on almost the same principle. She emphasizes that maintaining 'optionality' is more important than judging the quality of investment stocks. Becoming overly dependent on a specific investment target leads to a loss of options, putting one in a subordinate position.
She points out that investing your entire assets 'all-in' in a single stock is extremely risky. For example, if you invest your entire 100 million won in Samsung Electronics stock and the price drops significantly, you lose the option to make additional investments even if a good opportunity arises. She emphasized the importance of creating an environment where one can flexibly respond to crisis situations through strategies like dollar-cost averaging.
She explains that the most important thing in investing is to clearly distinguish the 'role of money.' You must determine whether the money you are investing is for living expenses or fixed costs, or if it is purely for investment assets. She emphasized that to enjoy the long-term benefits of compound interest, it is crucial to manage only 'investment assets' that do not interfere with daily life.
She proposed a method of allocating funds into six roles: living expenses, fixed costs, future education expenses, relationship expenses, and an asset income envelope. For example, if your annual income is 100 million won, she advised allocating 50% of that, or 50 million won, to the asset income envelope to be used as investment capital for the future.
She explained the importance of long-term investing using Nvidia's stock performance as an example. Nvidia, after its IPO in 1999, traded sideways for about 10 years until 2020, then began to rise rapidly. Through such examples, she emphasized that it is difficult to achieve significant returns through short-term trading of stocks, and for good companies, one must wait for the compound interest effect over time.
She cited the case of SoftBank CEO Masayoshi Son, who bought Nvidia shares in 2005 and sold them in 2017, just before the significant surge. She pointed out that this illustrates the lesson that if one is swayed by short-term price fluctuations and fails to secure enough time for investment, significant results cannot be achieved.
She states that the wealthy are always a minority, and those who have held Nvidia stock long-term from 1999 until now are successful examples in the US. She emphasized that without an investment philosophy, it is impossible to endure difficult periods like an -80% downturn for 10 years.
Professor Ahn Yu-hwa advises creating a fund envelope for building an asset income curve, investing that money precisely into asset income, investing whenever opportunities arise, and taking a sufficiently long time. She added that the current AI era is a once-in-a-century destiny, and there are many early-stage stocks with significant growth potential like Nvidia during this period.
She redefined wealth not by asset size but by the presence or absence of 'optionality.' For example, she compared A, who owns a 2-billion-won house but has no fixed cash flow, with B, who lives in a 500-million-won house but has a fixed cash flow of 3 million won per month. Professor Ahn Yu-hwa explained that A, without cash flow, might have to sell their house in an emergency, but B can make proactive choices, making B the true wealthy person. In other words, she emphasized the importance of defining the role of money and making 'investments with choices'.
She explains that the expense curve occurs regardless of an individual's preparedness, while the asset income curve is created through proactive effort. She emphasized that the ultimate wealthy life is to create a point where the cash flow earned from the asset income curve covers the expense curve. This means creating a state where one can cover various life expenses with asset income through investment and asset management.
Professor Ahn Yu-hwa reiterated that even when a timely opportunity arises, one should not invest indiscriminately. She advised successful investing through an 'investment life with choices' until the day the asset income curve surpasses life's expense curve. She added that it is crucial to have an investment philosophy and engage in thorough asset management.
Answers come from the transcript, with the exact spot cited.
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