[AK Radio] In the Era of Low Growth, Focus on the 'Bird in the Hand Rather Than the Bird in the Forest'

Lee Sang-geon: "Cash Flow and Global Diversification Are Key"
"Focus on Tax-Efficient Investments Like Pensions Over Real Estate"

The Bank of Korea has forecasted this year’s economic growth rate at 1.6?1.7%, signaling the full onset of a low-growth era. Some experts even predict it could be lower. What strategies should individual investors adopt in this low-growth era?

Lee Sang-geon, Head of the Mirae Asset Investment and Pension Center, presented four key points that investors should focus on in the current situation where low growth and aging population are intertwined. First, the importance of cash flow. "Low growth is a society that stifles dreams. Because reality is tough, people tend to prefer 'a bird in the hand' rather than 'a bird in the forest.'" He emphasized that investors should pay attention to assets that can generate real cash flow. He stressed that an era has come where immediate cash flow is more important than uncertain future value.

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Second, the scarcity of growth. In a low-growth era, growing companies become scarce, increasing the premium on them. Lee said, "In the past, when growth was 8?10%, a 2 percentage point difference was not significant, but in a 1% growth era, 2% growth means doubling growth," highlighting the need for a new perspective on growth stocks. However, he cautioned that due to this scarcity, companies that are not actually growing may be overvalued.

Third, the deepening polarization of asset markets. Recent movements in the real estate market show that this polarization is intensifying. The issue of regional extinction has reached a serious level. "Regional extinction is more than just a population problem; it leads to increased social infrastructure costs. When houses are scattered sparsely for water or gas pipe installation, costs rise. But these costs cannot all be reflected in electricity or gas bills. Ultimately, this leads to a government fiscal burden," he explained.

Fourth, government fiscal risk. As aging progresses, government welfare spending inevitably increases. Looking at Japan’s case, aging and government fiscal deficits have a proportional relationship. "Due to silver democracy, politicians’ welfare pledges increase, but this ultimately leads to fiscal burdens. Even pension reform worldwide follows the formula of 'pay more, receive later, and get less.' Accordingly, the importance of tax-efficient investment methods is expected to grow."

Center Director Sang-geon Lee identified cash flow, global diversification, and tax-efficient investment as the three key themes in the low-growth era.

In this environment, the most recommended strategy is global diversification. "Overseas investment is positive in two ways: it expands investment opportunities and, in extreme cases, can serve as a hedge against government fiscal risks." He explained that in Japan, deposits were preferred due to deflation, but global investment helped overcome these limitations.

Regarding real estate investment, he predicted a need for cautious approaches. "Even real estate experts say it is difficult to expect the same returns as in the past. Unless you are a professional investor, it can be risky for average investors to approach with excessive leverage," he said, emphasizing that "global asset allocation using tax-efficient tools such as pensions is important." In conclusion, investment in the low-growth era should be approached focusing on three keywords: cash flow, global diversification, and tax efficiency.

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