This blog post discusses the limitations faced by beginner investors, the importance of economic knowledge, and practical investment attitudes.
These days, I’m a novice investor who has just stepped into the world of investing. The more I learn about various financial products like stocks, funds, and bonds, the more I crave information, and naturally, my dream of financial freedom grows. But the moment I open an economics book, my head starts to throb at the sight of complex theories and unfamiliar terms. After reading just a few lines, I often go blank, my mind going completely blank. Above all, when the conclusions presented in the book unfold in a direction completely different from the investment methods I’d imagined, I feel nothing but confusion. No matter how hard I try to understand, the content doesn’t come easily, and I can’t make sense of it, leaving me only more frustrated.
In this frustration, I thought, ‘Why not try paid lectures?’ and started taking various online courses. However, most lectures focused on very basic financial literacy—things like types of bank products, the difference between savings and time deposits, fixed-amount and fixed-period investment methods, portfolio construction techniques, and so on. Of course, these lectures helped me develop a basic feel for investing and provided concrete hints on asset allocation. I even had experiences where I followed the instructor’s methods exactly and earned small profits.
But the real problem started after finishing the lectures. Once they ended, I was hit with the overwhelming question: ‘Now what should I invest in?’ It felt like being left alone in the middle of an unfamiliar city without a map. Looking back, what I had learned was merely a methodology within someone else’s predefined framework. The deeper investment knowledge and fundamental understanding of economics that lay beneath remained completely out of reach.
So, is there a way for investment beginners like me, lacking economic knowledge, to approach investing a little more easily without complex theories?
In fact, many novice investors respond well to simple advice or immediately actionable tips. Such guidance is straightforward, easy to grasp, and often yields quick results after implementation, creating positive investment experiences. Initially, these small successes help reduce fear of investing and build self-confidence. However, as time passes and experience accumulates, one realizes that simple advice alone is insufficient for making investment decisions.
Financial markets, in particular, are constantly fluctuating. One must flexibly adjust asset allocation and investment weightings according to market trends and be able to swiftly respond to unexpected changes. What worked before may not always be effective. If you’ve invested solely based on an instructor’s advice up to now, you might have managed to achieve some results even with limited basic economic knowledge or investment theory. However, when sudden shifts in the economic environment or unexpected market movements occur, responding appropriately is never easy.
One of the most critical elements in investing is risk management based on the amount and structure of your assets. The investment strategy you should choose changes completely depending on how much you have and what types of assets you hold.
For example, let’s assume a retired senior invested their entire retirement savings into a P2P financial product. P2P finance, short for ‘Peer To Peer Finance,’ is a financial service that directly connects borrowers seeking loans with investors through an online platform. Since funds flow without intermediaries like banks, higher returns than typical bank products are possible, but the associated risks and uncertainties are also significantly greater. It is an unsuitable choice for retirement funds, where stability and predictability are paramount.
Conversely, consider a middle-aged entrepreneur actively running a business. They already hold diverse assets like real estate, stocks, and vehicles, and have steady monthly income. If they invested in a Money Market Fund (MMF) based on someone’s advice, this could actually be a decision that reduces the efficiency of their asset management. MMFs are funds primarily composed of short-term financial products, offering low returns but high stability. While suitable for those prioritizing stability, they may be overly conservative for situations where one can tolerate risk to pursue higher returns.
These two examples ultimately convey the same message: strategy must vary based on asset size, composition, and investment objectives, and a copy-and-paste investment approach can actually be detrimental. As assets grow, investment strategies must become more granular and sophisticated. The notion that “what worked in the past will continue to work” must be decisively discarded. Instead, one must accept that the investment approach suitable for them now could be entirely different from what they learned in the past.
So, what criteria and principles should guide investment decisions?
At this point, anyone might imagine: “How wonderful it would be to have a 100% trustworthy financial advisor who perfectly understands my situation and can offer advice at every moment?” But reality is different. Even if you receive advice from a financial planner or financial expert, they ultimately operate within a framework designed for the average investor, providing only general knowledge. It’s difficult for them to consistently offer customized advice that reflects both your specific asset situation and the momentary shifts in the market.
Ultimately, the solution is clear: don’t rely solely on others’ words; instead, understand the principles of investing and asset management yourself. In other words, developing your own investment logic and criteria, and systematically learning how the market operates, is the most effective and sustainable strategy.
This is precisely the difference between ‘methodology’ and ‘practical application’. Methodology is a framework, formula, or general direction created by someone else. Practical theory, on the other hand, is your own investment strategy, built and executed by you, taking into account your asset structure, life circumstances, risk tolerance, and more. This isn’t to say methodology is wrong. Rather, it’s only by starting from that framework and expanding it into a practical theory that fits your life that you can accumulate investment experience, become sensitive to market changes, and grow into an investor capable of independent judgment and decision-making.
Furthermore, economics is not merely a theory or an academic discipline. It is a practical tool deeply connected to our daily lives, asset management, consumption habits, and even the way we relate to others. A solid grasp of basic economic principles and investment theory allows you to build a strong foundation for the long-term growth of your assets, beyond short-term gains.
What matters in investing isn’t just ‘what to buy,’ but knowing ‘why to buy’ and ‘when to adjust.’ Ultimately, the core of investing lies not in memorizing set methods, but in how you interpret and apply those methods within your own asset structure and the market’s flow. It may seem difficult at first, but as you organize and apply economic concepts one by one, you’ll eventually notice your perspective on the market has shifted.
The power to judge and decide for yourself, without relying on someone else’s advice. That is the true mindset of an investor. Rather than fixating on immediate profits, focus on building a long-term perspective and establishing your own principles. Ultimately, those who survive in the market and steadily grow their assets are precisely the ones who possess such ‘standards’.
Now is the time to ponder not ‘Whom should I invest like?’, but ‘How can I create my own standards?’.
