As I began studying business, particularly finance and investment, during my university years from 2005 to 2011, I developed a keen interest in these subjects. I even obtained relevant certifications. However, ironically, I found myself distant from actual investment. The reason behind this was my observation of my mother’s stock trading activities, which made me hesitant to get involved.

It wasn’t until 2017, while having various conversations with my friend Johnny, that the topic of stocks came up. Johnny mentioned some insider information he had come across (although, of course, insider information is rarely legitimate, especially if it’s coming from Johnny, claiming it to be insider information). He spoke about how “Hanmi Science” was expected to skyrocket. Initially, I didn’t pay much attention, but after a few days, I saw the stock prices continuously soaring. At the time, it was during the phase when biotech company stock prices were skyrocketing without limit. I found myself hesitating, but eventually decided to invest $1,000, which quickly gained a 70% return within two weeks. I still remember that moment vividly. Although I would have preferred a loss at that time, the profit boosted my confidence. It felt rewarding to see my strong numerical sense and my ability to gauge and ride market trends. However, I also realized that luck played a significant role. Therefore, I entered the stock market with a humble mindset, aware of the influence of unpredictable factors.

I conducted various analyses using indicators such as company analysis, industry prospects, financial analysis, valuation, and quantitative methods for domestic and international investments. However, the results were losses of double-digit thousands of dollars. While this may be an individual experience, I strongly agree with Warren Buffet’s opinion that “I do not think the average person can pick stocks.”

After going through numerous trials and errors, I eventually built a system based on index investing in my retirement account. Ah, you might wonder why I invest. The answer is always “preparing for retirement.” It took me years to finally understand the significance of this concept, which has been advocated by financial expert Mr. John Lee. You might question whether real estate can also serve as an investment. Well, objectively speaking, real estate certainly plays a vital role as a stable asset and as a foundation for one’s life. However, in my opinion, the stock market surpasses it. Of course, I believe that purchasing real estate, even in one’s 40s, is still a viable option. I will address this topic in a separate post.

Oh, and there was a case that further strengthened my conviction in this regard. I once managed the group company’s funds for about a year and a half as an investment manager. The managed capital amounted to approximately 50 million dollars. Before I took charge, the investments were primarily focused on bonds and deposits, ensuring a secure approach. However, after I took over, we began seeking higher market returns. Consequently, we received investment proposals from various securities firms, asset management companies, and banks, and executed investments accordingly. This happened during 2020-2021, a period when the stock market was bullish. As a result, we saw millions of dollars in unrealized gains on a semi-annual basis. At the time, I eagerly checked the performance every week. Additionally, I reviewed and executed investments in unlisted stocks (startups) and private equity funds. However, I realized that even during favourable market conditions, investments could turn sour, resulting in a decline in asset valuation and enterprise value. From this experience, I learned two important lessons:

1. Even experts make mistakes and are wrong
2. The CEO plays a vital role.

Even seasoned fund managers and analysts make errors. In the case of the U.S. market, active investors who outperform passive investors account for less than 10%. Moreover, this ratio decreases significantly over time.

So, what is an index investing system within a retirement account? Does it truly prepare us for retirement? How much wealth can be accumulated when we retire? The short answer is that, without working, we can receive a perpetual annual cash flow of around 100k dollars (pre-tax) in present value terms. This is assuming the investment returns remain the same. I will explain the details in upcoming posts, step by step.

Stay tuned for more insights on achieving financial security through index investing!