Published in 2021, "The History of Money Repeats Itself" received overwhelming love, but it didn't seem to immediately quench the thirst of its readers.
My email and YouTube channel are flooded with questions like, "I understand the message to invest in dollar assets, but I don't know where to start," or, "Korean stocks are too difficult to invest in. Why not go all-in on US stocks?"
The book you're reading today, "Get on the Money Flow," was created to answer this question.
This article will walk you through several steps to successfully investing in Korean stocks, answering various questions that arise along the way. It will hopefully provide some answers to those who wonder, "How should I start investing?"
In particular, [Stage 3] introduces various asset allocation strategies tailored to your investment style, so I hope you make good use of them.
---From the "Prologue"

Several years ago, when I was working at a certain organization, I was called before the 'Risk Management Committee'.
The chief investment officer responsible for making investment decisions asked:
"Why did you buy this stock? The price keeps falling."
To this he replied as follows:
“Because this company pays stable dividends, the dividend yield increases as the stock price falls.
As a long-term investment institution, I believe it is right to buy when the stock prices of quality companies that consistently pay dividends plummet.”
After hearing this, my boss didn't bring up the issue any further, and as time passed, I remember the company's stock price rising significantly, contributing to the improved performance of the domestic stock division.
Even among domestic stock managers, there was talk among themselves that “stocks that have been brought up to the risk management committee must be purchased additionally.”

But what would have happened if this company hadn't paid dividends at all, or had frequently suspended them? Perhaps the managers would have taken responsibility for the investment failure and responded to the unusual plunge in the stock price by cutting losses—selling.
This is the power of dividends.
In particular, long-term investment institutions such as pension funds do not pay dividend income tax, so they have an incentive to make long-term investments in companies that pay dividends and enjoy compound returns by reinvesting the dividends.
---From "Chapter 1: The Reality of the Korean Stock Market: What You Need to Know Before Starting to Invest"

The reason top-down investment strategies offer an alternative that alleviates the challenges of bottom-up investing is that they assess how the economy is performing, invest in industries expected to benefit from economic fluctuations, and shift to growth or value stocks in response to changes in market interest rates and sentiment. This strategy is well-suited to countries like Korea, where the economy fluctuates wildly.
While basic knowledge of top-down investing is necessary, there's relatively less risk of being bogged down in complex accounting books like with bottom-up investing.
Furthermore, the recent launch of various types of listed index funds (ETFs) has made it easier to invest in U.S. Treasury bonds as well as Korean value and growth stocks, which is also a factor that alleviates the difficulties of top-down investing.
Of course, top-down investing doesn't always guarantee success.
However, for those who invest by appropriately gathering various information like a 'fox', I think top-down investing is an investment alternative with a fairly high probability of success.

---From "Chapter 1: The Reality of the Korean Stock Market: What You Need to Know Before Starting to Invest"

So, how can we determine whether the high dollar/won exchange rate is a good time to buy Korean stocks, or whether the low exchange rate is a good time to buy dollars?
There are several methods, but I like the 'year-over-year growth rate' statistic.
If it is now December 2021, we are checking whether the exchange rate has risen or fallen compared to December of last year.
And if the exchange rate has risen compared to last year, you buy Korean stocks, and conversely, if the exchange rate has fallen compared to the same period last year, you buy dollars.
Of course, judging the right time to buy or sell after just one month is risky, so I recommend taking action when the exchange rate has been moving in the same direction for at least three months.
---From "Chapter 2: Top-Down Investment, Step 1: Let's Check the Exchange Rate Flow!"

The first person to discover the bullwhip effect was an executive in charge of baby diaper logistics at Procter & Gamble (P&G), a global consumer goods manufacturer.
He discovered something interesting while analyzing the fluctuations in demand for baby diapers.
Due to the nature of baby diapers as a product, consumer demand is always constant, but order demand from retailers and wholesalers fluctuates.
And these order fluctuations increase the further away from the end consumer you go in the so-called supply chain, which runs from 'end consumer-retailer-wholesale store-manufacturer-raw material supplier.'
It is nicknamed the "whip effect" because it is similar to the phenomenon in which, when swinging a whip, even a small wave at the handle increases the wave toward the end of the whip.
The bullwhip effect can be said to be the cause of the economic downturn in East Asian industrialized countries, such as Korea and China, even when there is a small shock to the consumer markets of developed countries.
Let me explain how the bullwhip effect manifests itself using the example of 2008.
---From "Chapter 4 Retail Sales Switching Strategy: Pay Attention to the Bullwhip Effect!"

The difference between 'Dual Switching Strategy 1' and 'Dual Switching Strategy 2' is that it utilizes U.S. retail sales and the National Association of Home Builders (NAHB) housing market index, while 'Dual Switching Strategy 2' utilizes U.S. retail sales and the Institute for Supply Management (ISM) manufacturing price index.
To summarize the backtest results, the cumulative performance of Korean stocks was only 348%, while the 'Dual Switching Strategy 2' achieved a performance of 1,071% since 2000.
Not only that, but the volatility was lower and the standard deviation of returns was also superior.
---From "Chapter 6 Dual Switching Strategy 2: Utilize U.S. Retail Sales and Manufacturing Index!"

If the 2000s were an era of domestic demand, the early 2010s ushered in an era of export-oriented growth.
It is particularly noteworthy that domestic demand stocks showed relative strength during periods of uncertain export prospects, such as the 2008 global financial crisis and the 2020 COVID-19 shock.
I think Korea's export-oriented and domestic-demand stocks are an ideal pairing, as they move in opposite directions and outperform U.S. Treasuries by a significant margin.
(Omitted) The reason why the Korean export/domestic demand stock switching strategy records high returns is because export and domestic demand stocks are complementary to each other, which suppresses the decrease in the investment principal.
(Omitted) The reason this phenomenon occurs is because if a loss occurs once in the principal, it takes twice the profit to recover.
Therefore, a good investment strategy can be said to be one that not only achieves absolute performance but also minimizes losses.
---From "Chapter 7: Korean Export Stocks and Domestic Demand Stocks: Where Should I Invest?"

Classifying stocks by 'factor' rather than 'sector' is called 'investment style'.
The most representative investment styles are value and growth, which we just mentioned.
Value investors prefer companies with solid assets but whose current businesses are boring, i.e., companies with low price-to-earnings ratios (PERs).
Growth investors invest in companies with promising futures but higher price-to-earnings ratios than the market average.
For reference, I am an omnivore.
In boom times, value stocks are preferred, and in recessions when corporate performance is poor, growth stocks are preferred.
The reason for this tendency is simple.
It's because of its rarity.
It is very rare to find a tree laden with apples in a snow-covered winter field.
Therefore, this tree is very rare and there will be a long line of people willing to pay a high price to buy it.
[Chapter 8: Korean Growth Stocks/Value Stocks, Large-Cap Stocks/Small-Cap Stocks, Where Should I Invest?]

Asset allocation refers to investing in various assets (US stocks, Korean stocks, US Treasury bonds, etc.) that are the target of a 'switching strategy' by dividing them into certain proportions.
Of course, you can't just invest in any asset; two conditions must be met.
First, they must have the property of moving in opposite directions, and second, they must be assets with an upward trend.
The pair that best satisfies this condition is 'Korean stocks/US Treasury bonds'.
The following chart shows the performance of Korean stocks and U.S. Treasury bonds since 2000.
You can see that both Korean stocks and U.S. Treasury bonds are trending upward, but their movements are moving in different directions.
When investors interested in asset allocation find such a match, they feel as if they have discovered a gold mine.
---From "Chapter 11: Let's Look at the Basics of Asset Allocation!"

I believe that there will be investors who, upon seeing the above analysis, feel that “there is such a world.”
Having managed assets ranging from hundreds of billions to trillions of won, I have a thorough understanding of asset management.
Since I left my job in 2019, I've only rebalanced about twice a year when asset prices fluctuate sharply, but I can't bring myself to rebalance with machine-like precision.
It's extremely difficult for individual investors to do things that even I, who have worked in the asset management industry for decades, cannot thoroughly do.
So I would like to suggest two alternatives.
The first is that operating in a haphazard manner like I do is not a bad strategy.
Just by allocating assets, you are already in possession of a very attractive investment vehicle, and it will also require less investment than trading using the 'top-down' strategy learned in [Stage 1].
Another alternative is to leverage financial institutions and mobile apps.
One way to achieve a simple "Korean stock/US Treasury diversification" is to purchase products like the Codex 200 US Treasury Bond Mix (284430) developed by Samsung Asset Management. Another option is to utilize the "Richigo App," which I also participated in developing, to provide a service that informs you of the timing of rebalancing.
Moreover, I am eagerly hoping that in the future, more convenient methods for asset allocation and rebalancing will be developed.
---From "Chapter 12: Into the World of Full-Fledged Asset Allocation!"

The lesson from the collapse of Japan's semiconductor industry is clear.
When disruptive innovation takes hold, companies that cling to existing customers and outdated technologies will not survive.
We must not forget that even Korean memory semiconductor companies, which currently hold the world's top spot, could face a crisis at any time.
So, where will disruptive innovation begin now? Scholars may have differing opinions, but I believe the automobile industry is on the brink of disruptive innovation.
In the past, automobiles were the darling of the mechanical industry, but now it seems that the moment has come when they will change to something like home appliances.
Companies that adapt well to the trends of electric vehicles and autonomous driving will survive, but I suspect that many existing automakers will disappear after the winds of disruptive innovation blow.

---From "A.2 Will the whip effect last?"