Installment Investment Gold Rule for Fund Investors
By Yoon Ja-young
Staff Reporter
Those who have put their money in equity funds are thrilled to see their investment returns rising with the KOSPI hovering around 1,790 points. But many other people, after missing an opportunity to jump in the bull market, are looking for the right time to move into the market.
Many investors are regretting that they didn't move quickly to subscribe to funds, and are also wondering whether it isn't too late now. Fund analysts say the time doesn't matter much as long as the investment goes in installments, for the long term.
Investment in Installments
``Fund investment is different from stock investment,'' said Lee Kye-woong, a head of the fund researching team at Goodmorning Shinhan Securities. He said investors don't have to worry about currently lofty share prices as long as the investment is made in installments.
The investor would naturally get decent returns when the index rises, but even when the index goes down, it means shares are bought at cheap prices, lowering down the average cost of shares.
Heo Jing-young, fund analyst at Zeroin, an online fund evaluator, also recommended investment in installments. ``Of course, it would be better if the investment was made when the shares are cheap, but I would say nobody knows where the ceiling is.'' She said investors can minimize risk by spreading out investments over time.
``Even when subscribing to a deposit type fund, one can make it like installment funds by putting in a portion of money at different times,'' Heo said.
Diversify Fund Portfolio
Analysts also recommended that investors diversify their funds. ``Though the Korean bourse is hot, investors should note that it takes only 1.3 percent of the global stock market. Risk gets bigger if one puts all his or her money in such a small region,'' Heo said.
She said investors should also diversify their overseas portfolio, including both emerging market and developed countries like Europe rather than putting all their money in China, for example.
Lee recommended emerging markets or post emerging markets like VISTA countries, which refer to Vietnam, Indonesia, South Africa, Turkey, and Argentina, as they are at the earlier stages of development than Korea.
However, diversifying region doesn't completely eliminate risk, as global markets are showing strong correlations these days, Lee said. ``Funds investing in bonds, REITs, or commodities, which have little to do with stocks, could decrease risk.''
It Isn't Time to Withdraw Money
The lucky people who have already subscribed to the funds are enjoying handsome investment returns, but they are also wondering whether now is about the time when they should withdraw money and realize the earnings.
But a massive withdrawal of money isn't likely, and fund investment seems to have become a new culture for investors. ``Investors used to withdraw money after steep gains of indexes, on the judgment that it has risen enough. It isn't so any more after it broke 1600 points,'' Heo said. She said money just flows into the market as old investors keep their money in the funds. Analysts recommend partial withdrawal of money rather than the complete closure of the fund accounts.
However, there also looms concern that the indexes may fall in the earning season starting in July, if business performances don't back up the rising share prices.