[Inside Chodong] United We Stand, Divided We Fall

[Asia Economy Reporter Song Hwajeong] This summer, which was scorching hot, the Olympics held for the first time in five years helped people forget the heat. Despite the chaotic situation both domestically and internationally, including the still uncontrollable spread of COVID-19, the Olympic games moved and cheered the public. In this Olympics, the team events showed particularly strong performances. Out of six gold medals, four were from team events. Archery and fencing, which can be considered the most successful sports in this Olympics, swept all the team event gold medals in archery, including mixed team, women's team, and men's team. Fencing also earned a gold medal in the men's sabre team event, a silver medal in the women's ?p?e team event, and bronze medals in the men's ?p?e and women's sabre team events respectively. In individual events, athletes compete alone and bear the burden alone, but in team events, if one player underperforms, others can compensate, and the burden is shared. Together, they become stronger.

The formula that "together we are stronger" is no exception in the stock market. Investment experts often emphasize the importance of diversification. Although diversification implies spreading out and can be understood as the opposite of gathering, if understood as investing in multiple stocks (team events) rather than a single stock (individual event), the formula of becoming stronger together applies. This month, concerns about the semiconductor industry emerged, leading foreigners to massively sell Samsung Electronics and SK Hynix. As a result, Samsung Electronics dropped to the 70,000 won range, and SK Hynix, which was in the 120,000 won range earlier this month, also fell to the 100,000 won range. Foreigners sold 7.3795 trillion won worth of stocks on the KOSPI this month, with Samsung Electronics and SK Hynix accounting for 6.8297 trillion won and 1.6477 trillion won of net sales respectively. Samsung Electronics and SK Hynix made up almost all of the foreign net sales. Betrayed by the trusted semiconductor sector, individual investors could not help but feel uneasy. This month, individuals were the largest buyers, net purchasing 5.826 trillion won of Samsung Electronics and 1.5885 trillion won of SK Hynix. Not only this month but also for the entire year, Samsung Electronics and SK Hynix rank first and second in individual net purchases. Since the beginning of this year, individuals have bought 32.829 trillion won of Samsung Electronics and 5.4957 trillion won of SK Hynix. The total individual net purchase on the KOSPI this year was 69.484 trillion won, with nearly half poured into Samsung Electronics. Therefore, when Samsung Electronics falls to the 70,000 won range and the stock price weakens, individuals inevitably feel anxious.

A friend of the reporter bought Samsung Electronics stocks whenever extra money was available. This month, as Samsung Electronics dropped to the 70,000 won range, the friend suffered considerable losses. When asked why they did not buy other stocks, the answer was that they also bought some SK Hynix stocks. On the other hand, another friend mainly invested in Samsung Electronics but adhered to the principle of diversification by also buying other stocks with good earnings or favorable industry conditions. When Samsung Electronics showed a sluggish trend after peaking at the beginning of the year, this friend net purchased secondary battery and bio stocks, which paid off well during this downturn. They more than compensated for the losses incurred from Samsung Electronics.

There is an investment adage: "Don't put all your eggs in one basket." It emphasizes diversification. If all funds are invested in one stock and that stock rises significantly, profits will naturally be large. However, stocks do not only go up. Even stocks that seem to rise continuously will inevitably fall at times due to various factors. In the unpredictable stock market, reducing risk is paramount. Diversification is the most basic principle to reduce risk.

This content was produced with the assistance of AI translation services.