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Investment Techniques for Students

 

     
 
   
 

  

  Kim Na-ri, a student of the DongGuk University in Gyeong-ju, has been interested in funds from when she earned money by working as a part-time job worker last summer vacation.  Although she already had enough money to invest in funds, she didn't hurry.  First, she made certain that the goal was for studying abroad.  And she read books on economy and analyzed the direction of market trends steadily.  After that, she started in investing funds last February.  She's investing for achieving returns of more than 20% in 3 years.  There is no knowing how it will go, but she is not afraid of it anymore. 
  Investment techniques gained popularity among undergraduates the last several years.  A survey found that 47.4% of the 2,480 students who were asked, "If you won the lottery, what would you do first?" said they would invest and save it.  It is not hard to see the students' interests in investment by students taking many lectures and buying best-seller books related to investment.  But how many have a strong confidence on investing like Kim? It will be interesting to see whether they are really prepared to do it or not. 
<Chart>
Q) Are you interested in investment techniques? (%)
A) I'm investing now. (50)
   Yes, but I don't know how to invest money. (31)    
   I'm not interested in it. (19)

Q) What means do you use for investing?
A) stocks (5)
   funds (40)
   installment savings (24)
   deposit (28)
   etc. -insurance (3)
Q) How much do you invest every month?
A) below thirty thousand won (2)
   below fifty thousand won (3)
   between fifty thousand won and one hundred            thousand won (28)
   more than one hundred thousand won (67)
Q) What is your purpose of investment funds?
A) To pay educational expenses or cost of studying        abroad (22)
    To buy wish items (8)
    To make some money for the future (63)
    To pay entertainment costs  (6)
    etc. (1)
Q) How do you get information about investment?
A) through the media (ex. TV, newspaper) (5)
   read technical books about economy (5)
   consult with an expert (2)
   get advice from acquaintances (46)
   I just believe myself (42)
  According to  a research,   81% of students are interested in investment techniques.  Almost half of students prefer funds, and the rest of them prefer savings.  It means most students prioritize security to taking a risk.  And lots of students seemed to have a long view on investing because 63% of them responded that they want to raise money for the future.  Lastly, almost half of students answered they resort to acquaintances or they decide for themselves.  But it could be dangerous because gaining informations around you are not always reliable. 

Examination on investment techniques of students
 

     
 
   
 
What has caused the investing by students?  According to Kim Su-hwan, Private Banker of TNV Advisors, this phenomenon was caused by the change in the money market and society.  Overall, financial agencies have become bigger and more global.  The boom prices and low interest rates also have existed for economic reasons.  Most of all, early retirement, an aging society and the worsening job market make them invest funds and stocks earlier as a kind of future insurance.  In this situation, a lot of books about successes in investment havebeen flooded at the book stores.  Many students read these books and they try to imitate successful men's investment style blindly.  So loan sharks who have sinister intentions on unprepared students are prevalent.  "I saw students who were damaged by bank frauds including multi-level marketing," he said.  He expressed another concern about investing of students.  Their small capital can bring about adventurous and extreme attitude on investment.  The broader, longer term view on investment is wiser to conduct safer investment than higher returns in a short time.  How much one can gain in returns is important, of course, but it is more important to save your capital. 
" Investment technique is not a passing phenomenon. It is our life parter," he added. 
<Recommendable Books>
▪ 'A country doctor's rich economics' by Park Kyoung-chul (leader's book)
▪ investing in funds : 'Beginning with zero' by Lee Seon-wook (the nan)
▪ 'The magic of compound interest' by Cho hong-dong  (Ahsahi)
Professional Advices
  First, you should set a specific goal and investment period before you begin investing.  If you don't set your goal,  you may have the indiscretion to make more money.  Kim Jong-mo, certified financial planner, said that students should separate investment funds from financial plan.  In general, investment fund is a short time investment, whereas financial plan is a overall plan of one's life for such as employment, marriage, education and retirement.  In the long view, it is better to put emphasis on financial plan.  Secondly, you should fix the limit of risks.  All financial products have their own DNA like a human.  It means each product can end up in a certain result regardless of whatever you expect.  So you must take a possibility of a poor choice, not undertake responsibility to financial products when you lost money.  To have an economic point of view, read a newspaper everyday to improve your financial insights.  The prompt information is not reliable in investment.  In fact, newspaper clipping is a habit of the rich.  Don't stop reading newspapers and you try to form a habit to scrap articles about finance and economy.  Next, you should carry out investment after you make a plan.  You may all make slips when you start investment.  More practice means fewer errors, so practice is the most important thing.  As a proverb says, well begun is half done, the earlier you start, the more you can get profit.  The '72-Rule' proves it is true. 


<The 72-Rule>
72-Rule= 72 ÷ interest rate
 If something is growing at a rate of 1%,it will double itself in 72 years.  Therefore, if something is growing at a rate of 8%, it will double in (72/8=9), 9years.  Now Korea's interest rate is about 4%, so it will double in (72/4=18), 18years. 
 If you save up 0.1 billion won until the age of 60...
( On the assumption that interest rate is 6%)
1. the principal sum : 23,520,000 won
the age of thirty: 30 years x 99,000 won a month
2. the pricipal sum : 72,840,000 won
the age of forty: 20 years x 215,000 won a month
→ compound interest effect
<Cost Average Effect>
Month price per stock(won) the purchase(number of stock) investment per month(won)
first month 10,000 100 1,000,000
second month 5,000 200 1,000,000
third month 10,000 100 1,000,000
Total 7,500 400 3,000,000
      the fall of average purchase price
 1. Diversified investment is possible as a small sum. 
 2. It is possible to invest division purchase and you get consistent profitability. 
 3. If investment continues in the long term, it will possible to prepare for security of the aged. 
 
 " Do not enter the financial market without extensive preparation, or you may become broke," he said.  You can be the best investor if you really understand investment market and have your economy sense. 

Jun Ji-min  onlyonejm@dongguk.edu

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