What Are the 5 Principles Beginner Pension Investors Should Know?

Mirae Asset Retirement Research Institute Publishes Happy Retirement Power Plant Issue 14
"Pension Investment Beginners Should Focus on Returns, Volatility, and Global Quality Assets"

[Asia Economy Reporter Minwoo Lee] Mirae Asset Retirement Research Institute has published a report summarizing essential factors that investors starting pension investments should know. It explains that investors should simultaneously consider returns and risks, manage volatility, and focus on global quality assets.

On the 22nd, Mirae Asset Retirement Research Institute announced the release of "Happy Retirement Power Plant No. 14," which contains these insights. This issue presents basic principles of pension investment under the theme "Five Things You Must Know When Starting Pension Investment."

First, it emphasized the importance of considering both returns and risks together. This means that investors should check whether the returns and risks of the assets under consideration align with their investment knowledge, investment horizon, and risk tolerance.

Volatility management was presented as the second principle. The report states, "Assuming Investment A has an arithmetic average return of 5% with +20% upside and -10% downside, resulting in 15% volatility (standard deviation), and Investment B has the same average return but with +40% upside and -30% downside, resulting in 35% volatility, if the initial investment amount is 1,000 KRW, after 30 years, Investment A would yield 3,172 KRW, while Investment B would yield 739 KRW." It explains, "This means that investments with high volatility at the initial stage are more likely to have poor outcomes, so it is important to manage volatility through diversification when managing pension assets."

The inclusion of global quality assets that steadily grow while overcoming market volatility was also emphasized. This is regarded as satisfying both risk management and long-term return enhancement. Examples include global REITs (Real Estate Investment Trusts), which generate steady cash flow.

Additionally, the report recommends considering automatic investment products such as Target Date Funds (TDF), wrap accounts, model portfolio (MP) insurance, and also investments during pension withdrawal phases.

Meanwhile, this issue includes "Global Retirement Stories," which covers retirement news abroad, and "Well-Aging," the secret to health after retirement by Kim Heon-gyeong, head of research at the Tokyo Health Longevity Medical Center. Detailed information can be found on the Mirae Asset Retirement Research Institute website.