[PB Notebook] Investment Strategies for an Era Where Preparation Matters More Than Prediction

Preparation and Diversification Are Key in an Unpredictable Asset Market
A Balanced Portfolio Structure Matters More Than Chasing Returns
Strategically Respond to Opportunities with Currency and Asset Diversification

In the current asset market environment, preparation is more important than prediction. Amid volatile fluctuations in interest rates, exchange rates, and stock markets, the first thing investors should check is not their target returns, but whether they have diversified their assets to spread risk. The core of any investment strategy is to maintain balance. In other words, a strategically diversified approach based on equilibrium and flexibility is essential. While prioritizing stability, it is optimal to diversify assets to enable investment in opportunities, as this is the most effective response to today’s market conditions.

‘Diversification’ is not simply a means of risk avoidance, but a structural strategy. Many investors tend to concentrate most of their assets in won-denominated domestic stocks, deposits, and real estate. However, the movement of exchange rates in recent years has demonstrated the risks of currency concentration. Whenever the won weakens, investors holding foreign currency-denominated assets have not only been able to defend their portfolios, but also seize profit opportunities. Now is the time to actively increase the proportion of foreign currency assets. Currency diversification acts as a ‘firewall’ that protects assets from crises that may occur anywhere in the world.

‘Bonds’ have once again become ‘income-generating assets’. Bonds are attracting renewed attention. In addition to stable interest income, investors can also expect capital gains when interest rates decline. In particular, mid- to long-term government bonds and high-quality corporate bonds in the 2 to 5-year range serve as ‘income-generating safe assets’. Bonds are not merely defensive assets; they are an asset class that can provide both profitability and safety. Over the long term, it is also advisable to allocate a portion of assets to medium- and long-term government bonds in preparation for a rate-cut cycle. Dollar-denominated bonds can provide the benefits of currency diversification even without currency hedging, and utilizing products such as foreign currency insurance and foreign currency MMFs allows investors to pursue both dollar asset accumulation and stable interest income.

In the stock market, a ‘hybrid mindset’ is needed rather than a theme-based approach. Advanced technology stocks such as artificial intelligence (AI), semiconductors, and autonomous driving continue to offer growth potential. However, these expectations are already largely reflected in their prices. Instead of focusing on overvalued thematic investments, a hybrid strategy that balances growth and profitability is necessary. Global income funds, which naturally blend these two elements, are a representative example of income-oriented funds that combine bonds and dividend stocks, offering the advantages of fixed income and global diversification.

Lastly, cash should be regarded not as a ‘passive standby’ but as an ‘active opportunity asset’. The greater the uncertainty, the more suddenly opportunities appear. Without liquidity at such times, even the best investment ideas cannot be executed. Therefore, holding a certain proportion of cash is not just a means of risk avoidance, but a strategic asset that enables the fastest response to market changes. Cash can serve a dual role: as an opportunity asset in a market downturn, and as a defensive asset in a market rally.

Recently, the market has been shaped by a complex interplay of three factors: interest rates, exchange rates, and politics. The downgrade of the U.S. credit rating and tariff threats from former President Trump are dampening global investor sentiment, with the yield on the 10-year U.S. Treasury rising to 4.51%. Meanwhile, in Korea, the possibility of a base rate cut by the Monetary Policy Board is increasing downward pressure on the won. In such a financial market, a dollar-cost averaging strategy can be used as an opportunity to increase dollar-denominated assets.

In conclusion, in a volatile market, what matters most is not ‘direction’ but the ‘structure of assets’. While pursuing returns is instinctive for investors, the era of having to bear all risks for this purpose has passed. Now, it is crucial to build a portfolio structure that remains stable amid uncertainty, and to be strategically prepared to respond immediately when opportunities arise.

Kim Mijeong, KB GOLD&WISE the FIRST Apgujeong Center PB