For those who want to be part of the investment craze

An investment craze is sweeping the world. Whether it be investment in stock, coins, or real estate, it is becoming harder to find someone who is not investing in anything. Perhaps this trend is attributable to the belief that it is hard to be successful only with the income you earn from work. In other words, the era we are living in demands that we have both earned income and financial income. Whether we make bold investment decisions or not, how about we keep up with the trend by understanding it?
Article. Editor’s Office

Driver of the investment fad amid the crisis and trend

The Covid-19 outbreak, which began in March 2020, transformed the world and our lives into total chaos. And that’s not all. It seemed as if the economy was at the brink of a crisis with the stock markets around the globe crashing. As Korea’s KOSPI index fell day after day, investors trembled in fear of another financial crisis like the Lehman Brothers disaster around 10 years ago.

I should stop right here and walk you through what the Lehman Brothers catastrophe was all about. Lehman Brothers was one of the most successful investment banks on Wall Street with 150 years of history. The bank was increasing profits by investing in mainly mortgage-backed securities when suddenly it went bankrupt on September 15, 2008 after becoming overleveraged and due to the decline in real estate values. As a result, the financial markets collapsed.

However, fear didn’t last long. As the saying goes, “in the midst of every crisis, lies great opportunity,” and people remained optimistic that the market would bounce back just as it did after major crises like Black Monday of 1987, the Asian Financial Crisis in 1997, and the September 11 attacks in 2001. In fact, even new investors flocked to the stock market believing that this could be an opportunity and the stock trading volume reached all-time highs day after day.

The same goes for the situation brought about by Covid-19. The pandemic had us worried about another wave of a financial crisis for a while, but then what we’re actually experiencing is an investment craze. Have you ever heard of the so called “Donghak Ant Movement”?

This is a term newly coined in the stock market amid the prolonged Covid-19 pandemic. Ants or individual investors in Korea actively bought domestic stocks and fought and succeeded in shielding the falling stock prices of Korean conglomerates when the KOSPI index fell to the 1,430 point level and foreign investors sold domestic shares in huge numbers.

Thanks to the Donghak Ant Movement and economic recovery, the stock market has now stabilized over the past year. And then we faced another wave of craze for orders for IPO shares. Companies disclose their business information to people before their initial public offering, receive orders for IPO shares, and allocate shares to them and the reason that this type of investment became so popular is because the shares doubled above the IPO price.

Do you now see why everyone is going crazy over investment? The crisis made people feel uneasy and anxious, but the belief that the economy always recovered and that they could no longer be well-off with their salaries led them to begin making investments. This is why there is an investment craze even in the era of instability. Of course there are many types of investment other than shares. As you all probably know, there is a cryptocurrency craze going on. Cryptocurrencies are digital assets that leverage cryptography to record or store transaction information on a distributed ledger. The cryptocurrency most widely known is Bitcoin, which was introduced back in 2009, but Ethereum and Dogecoin are also currently garnering much interest.

We don’t know if this is true or not, but we hear stories on the Internet about an employee who used to work for Goldman Sachs, the world’s best investment banking firm quitting work after making billions from investing in Dogecoin; a person working for a large Korean conglomerate making 40 billion by buying cryptocurrencies with just 50 million won; and a person who earned 3 billion won in profit in just a year. As these stories spread, not only those in their thirties and forties, but also the other generations are flocking to the cryptocurrency market.

Fads that come and go

There is a movie titled “Right Now, Wrong Then.” The title of this movie correctly describes the current fad for investment. In the world where a lot of information spreads and new things are constantly being introduced, much of what we are interested in today may have not existed in the past or may disappear again in the future.

For example, do you remember the Honey Butter Chip, a product produced by Haitai in 2014? These chips were so hard to get that people were even willing to pay several times, or even dozens of times more than their original price to buy them. However now, Honey Butter Chips are the same as any other types of chips and are not getting the attention they used to. The list goes on. Taiwanese Castella Cakes, black sugar milk teas, and even masks whose price skyrocketed when they were in extremely short supply due to Covid-19, to name a few. Another example would be Gompyo Wheat Beer, which was successful in attracting consumers’ desire for retro-style, and thus sold out everywhere. This particular product is starting a revolution in the beer market. However, the day will come when people lose interest in Gompyo Beer, currently in high demand.

The important thing to note is that we should not jump the gun and make rash decisions simply based on the current moment without understanding the big picture and weighing the pros and cons. Now that there’s a craze, is it the right time to start investing or not? No one can guarantee for sure. What we should always remember is that all fads disappear not much longer after they reach a peak. And you should take responsibility for any results that come from being part of the fad, and no one else.

Legendary investors’ special yet simple investment rules

The fact that everyone’s crazy about investing tells us that perhaps we all want to become super rich, achieve financial freedom, and not worry about money, space, and time. However, there’s a huge difference between the consequences of understanding and enjoying the craze, and simply enjoying it without knowing anything. If you’re interested in joining the investment craze we’re witnessing today, how about learning from those who are called the masters of investment?

Let’s start with Warren Buffett who is well-known for being a billionaire and one of the most successful investors in the world. Warrant Buffett is a legendary investor who is famous as the CEO of Berkshire Hathaway and also for following the example of Benjamin Graham, the father of value investing. Value investing means to invest in the stocks of large established conglomerates based on their intrinsic value and growth rate and holding on to them for a long time. Buffett is a man who knows the stock market and how it works inside out.

Out of all famous Warren Buffett quotes about investment, the two that are best known are “Never Lose Money,” and “Never Forget Rule Number One.” These are his basic rules of investing. “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” This quote shows that Buffett recommends making long-term investments in stocks that have promising value. Although it seems simple and easy, this principle is not easy to observe. That’s because it’s just too easy to get swayed by mind games when it comes to investing.

Next is Ray Dalio, an American entrepreneur and investor. If the 20th century was Warren Buffett’s era, the 21st century belongs to Dalio and he was even more acknowledged for creating a successful portfolio amidst the global financial crisis. Dalio’s investment strategy says investors should have a well-diversified portfolio composed of items not related to one another whatsoever, which helps improve returns while reducing risks.

As the above illustrates, Warren Buffett and Ray Dalio clearly have different investment techniques. But they’re still referred to as the world’s leading investors. It’s not that their investment methods are different because times have changed. Simply put, no one is right or wrong. Though the starting point and direction you go towards may be different, the final destination will be the same as long as you set the principles right. The investment craze is not showing any signs of cooling down and if you want to be a part of this fad, you’d better start by establishing your own investment rules.