“People who chase leverage or cheap stocks cannot become wealthy. Wasting two to three years on misguided investments now is equivalent to losing 2,000 times the returns when considering the compounding effect over the distant future.”
Bae Jae-kyu, CEO of Korea Investment Management and known as the “father of Korean ETFs,” issued another strong warning against short-term trading and leveraged investments at a press conference celebrating the listing of the “ACE Semiconductor Plus Strategic Industries ETF” held at the Conrad Hotel in Seoul’s Yeouido district on the 10th. He stressed that rather than aiming for a “one-shot” win, investors should trust the direction of globally competitive growth industries and invest for the long term.
At the event, Bae identified South Korea’s five core industries leading the AI era as semiconductors, shipbuilding, defense, nuclear power, and automobiles (humanoids), announcing the official launch of the “ACE Semiconductor Plus Strategic Industries ETF” on the 11th, a product that concentrates investments in these sectors.
“Direction and Time Matter More Than Momentary Gains”
Bae pointed out that many investors dabble in leveraged products on individual stocks or undervalued value stocks for immediate returns, but sustainable wealth cannot be built this way. “Even if you succeed in short-term trading two or three times and pocket profits, a single failure will wipe out all the money you’ve made,” he said. “Leverage creates volatility so extreme that investors struggle to endure it. Even if your direction is correct, you cannot make money if you fail to withstand the volatility that emerges over time.”
On the 30th of last month, he also argued via his social media regarding 2x leveraged and inverse ETFs on individual stocks like Samsung Electronics and SK Hynix that “the best course is not to do it at all,” asserting they “should be left to die naturally, not delisted.” At that time, Bae warned that even if the stock price direction is correct, repeated fluctuations can rapidly erode product value due to daily rebalancing and compounding effects.
For successful investing, Bae emphasized “direction” and “time.” He used the Nasdaq 100 index as an example to explain the compounding effect of long-term investment. “When a grandchild is born, put 20 million won (approximately $14,114) — the tax-exempt limit — into the Nasdaq 100 and leave a will instructing them not to sell until retirement at age 55,” he said. “Assuming an average annual return of around 15% over 55 years, the principal could multiply more than 2,000 times.” Two thousand times 20 million won amounts to 40 billion won (approximately $28.2 million). He emphasized the compounding effect that grows with time, noting that cumulative returns of approximately 2,100x at year 55 could expand to roughly 4,300x by year 60.
Essential AI-Era Infrastructure: Focus on Shipbuilding, Defense, and Nuclear Power
The long-term growth axis Bae is watching is artificial intelligence (AI). He predicted that the spread of AI will increase data center investment, simultaneously boosting demand for the semiconductors and power/energy industries that drive them. “The core infrastructure of the AI era is data centers,” he stressed. “The semiconductor and power industries that operate them are the most promising. Semiconductors, power, and energy must move together with AI.”
Domestically, he identified five promising sectors: semiconductors, automobiles, shipbuilding, defense, and nuclear power. The assessment is that while it may be difficult for South Korea to be the world’s first to create entirely new general-purpose technologies, the country already possesses world-class competitiveness and industrial ecosystems in these fields.
Lee Sun-yup, CEO of AFW Partners, who presented at the seminar, said, “Leading industries driving structural growth in the South Korean stock market include semiconductors, shipbuilding, defense, and nuclear power.” He forecast that “these sectors are not only building moats amid the global landscape of U.S.-China hegemonic competition but also possess long-term growth drivers, enabling sustained profit increases rather than one-off gains.”
Regarding the shipbuilding industry specifically, Lee presented three key tailwinds. First, International Maritime Organization (IMO) environmental regulations are increasing demand for eco-friendly vessels, an area where South Korea holds strengths. Second, U.S.-China rivalry is accelerating the expansion of U.S. naval power. Third, as AI data center demand grows, the concept of floating AI data centers utilizing ships is becoming more concrete.
Nam Yong-soo, head of the ETF division at Korea Investment Management, emphasized, “Shipbuilding, defense, and nuclear power are essential infrastructure industries for the AI era. While there are many national strategic industries, only these three meet the criteria of demand sustainability, competitive substitutability, and linkage to shareholder value.”
ETF Launching with Diversified Investment Across Five Strategic Industries
The “ACE Semiconductor Plus Strategic Industries ETF,” listing on the 11th, is a product that concentrates investments in a total of 10 representative companies — two each from five industries: semiconductors, shipbuilding, defense, nuclear power, and automobiles (humanoids). The structure uses semiconductors, shipbuilding, defense, and nuclear power as the core pillars, while flexibly adding the fifth industry — chosen from automobiles, secondary batteries, pharmaceuticals/bio, entertainment, and other major domestic sectors — based on factors such as industry scale.
Nam said, “With a portfolio concentrated in specific sectors or stocks, it is not easy to endure the kind of extreme volatility we’ve seen recently. I hope investors will pursue long-term investment that withstands volatility through a strategy of diversified investment in globally competitive domestic strategic industries.”
Bae, however, advised that when investing in semiconductors, it is necessary to look at the entire ecosystem rather than concentrating solely on memory. “We must always remember that memory remains a cyclical industry,” he explained, noting that investing across design, memory, foundry, and equipment together allows investors to capture the growth of the entire industry even if a specific area wavers.
Meanwhile, South Korea’s stock market saw a rotational rally centered on the KOSDAQ. The KOSDAQ closed up 55.66 points (6.97%) at 854.47, with the upward trend continuing from the opening bell, triggering the 18th buy-side circuit breaker of the year. The KOSPI finished trading up 40.89 points (0.65%) at 6,299.66. Defense and shipbuilding stocks showed strength, with Hanwha Aerospace (+5.01%) and HD Hyundai Heavy Industries (+5.14%) rising, while Samsung Electronics closed down 0.43% at 230,000 won (approximately $162) and SK Hynix fell 0.14% to 1.42 million won (approximately $1,002), reflecting a mixed performance across sectors.