On August 13, the S&P 500 closed at a new all-time high — 7,798.99, up 0.65% on the day — after US inflation data came in softer than expected. The Nasdaq Composite hit 26,803.03, the Dow closed at 53,839.99, and the 10-year Treasury yield sat around 4.65%. The next morning, the same optimism jumped the Pacific: the KOSPI closed at 6,977.94, up 2.42%, briefly touching the 7,000 mark for the first time in fifteen trading sessions.
I read that headline over coffee and felt the same itch I feel every time the market prints a new record. Everything’s going up. Shouldn’t I be picking the stocks going up the most, instead of buying the whole market and hoping for the average?
I’ve felt that itch probably two hundred times since I started investing in 2009. For most of those years, I acted on it.
I picked individual stocks for about fifteen years. I read the reports, I had my reasons, I was sure. I lost money doing it — not once, repeatedly, and not in a way that taught me anything quickly. The losses were never dramatic enough to make me quit and never small enough to ignore. That is the trap. A spectacular blow-up would have stopped me in a year; a slow drip of being slightly wrong kept me going for over a decade.
I stopped in 2024. That is when I started funding my pension accounts seriously and buying broad index funds and dividend ETFs instead — the S&P 500, a US dividend index, a few others. My accounts today — a couple of personal pension savings accounts (연금저축), an Individual Savings Account (ISA), an Individual Retirement Pension (IRP), and a general brokerage account I opened this year — hold almost nothing but broad index funds and sector ETFs. No stock-picking, no “this one’s going to be the next big thing.” Just the market, bought a little at a time.
So this is not a post by someone who was always disciplined. It is a post by someone who paid fifteen years of tuition to learn what the data already said.
This post is the one I’ve been meaning to write since I started this blog: why I don’t pick stocks, what the evidence actually says about people who try, and where that leaves someone like me — an engineer with a spreadsheet, not a hedge fund.
What “indexing” actually means
An index fund doesn’t try to beat the market. It tries to be the market — or a slice of it. A fund tracking the S&P 500 simply buys all 500 companies in roughly the same proportion as the index itself. When the index goes up 2%, the fund goes up about 2%, minus a tiny fee. When it goes down, so does the fund. No manager is trying to guess which of the 500 will do best next quarter.
Stock picking is the opposite bet: that you, or a fund manager you’re paying, can identify which individual companies will outperform the broader market — and do it consistently enough, after fees and taxes, to come out ahead of just owning everything.
Both approaches use the same building blocks (stocks, funds, ETFs). The difference is the claim being made. Indexing says: “I don’t know which company wins, so I’ll own all of them.” Stock picking says: “I know — or someone I’m paying knows — which ones will win.”
I’m not against the idea in principle. I’m against it for me, for reasons that have more to do with time, temperament, and arithmetic than with any grand theory.
My own answer, in structure rather than numbers
I’ve published my portfolio’s shape on this site before — the pie chart on the home page and the numbers from my first monthly recap in July — so I’ll reuse those public figures rather than pretend they’re a secret. As of that recap: S&P 500 exposure sat at about 29.0%, a Dow Jones dividend bucket at 19.3%, bonds at 18.6%, cash and short-term instruments at 18.1%, Nasdaq exposure at 8.0%, and a small “other” bucket — AI infrastructure and quantum computing ETFs — at 7.0%.
Every one of those buckets is filled with index or sector ETFs, mostly Korean-listed funds tracking US indexes (TIGER, KODEX, and SOL series products tracking the S&P 500, Nasdaq 100, and a Dow Jones dividend index), plus one true long-duration Treasury bond fund. I hold a tiny position or two in individual names — an ADR here and there — but they’re rounding errors, not a strategy.
The account structure itself is a deliberate, three-layer design, not an accident:
| Layer | Purpose |
|---|---|
| Company-matched | Employer contributes alongside me |
| Tax-refund | Annual contribution earns tax credit |
| Flexibility | No lock-in, redirect anytime |
The pension savings accounts and IRP sit in the first two layers — money I get a tax credit for putting in, some of it matched. The ISA and the new general brokerage account sit in the flexibility layer — money I can move, spend, or convert without waiting for retirement age. Every layer, regardless of purpose, is filled the same way: buy the index, on schedule, and don’t touch it.
Korea vs. the US: two very different investing cultures
This is where the comparison gets genuinely interesting, and it’s a gap I don’t see covered much in English-language personal finance writing.
In the United States, the shift toward index funds has been underway for decades. Cumulative flows tracked by the Investment Company Institute have shown index funds and ETFs steadily taking share from actively managed mutual funds, to the point where indexed products now make up a large and growing portion of US equity fund assets. It’s closer to the default than the alternative now.
Korea’s retail culture still leans differently. Individual investors here trade individual stocks directly, and often, at a much higher rate than their American counterparts — visible in the KOSPI’s retail turnover figures, and illustrated well by August 14 itself: the index jumped 2.42% while foreign investors bought heavily and local retail and institutional money sold into the rally, taking profits on individual names rather than riding the index up. That’s a real behavioral difference, not a stereotype.
At the same time, Korea’s own index ETF market has grown enormously. The TIGER and KODEX families — the same ones filling most of my accounts — didn’t exist in their current form a generation ago; they’re now among the most heavily traded products on the Korea Exchange. The infrastructure for indexing has arrived here even if the retail habit of stock-picking hasn’t fully given way to it. I sit on the American side of that cultural line while living entirely on the Korean side of the tax code — which is its own article’s worth of complexity (domestically listed funds tracking foreign indexes are taxed differently here than funds listed directly overseas, a topic for a future post).
| Korea | United States | |
|---|---|---|
| Retail habit | Individual stocks, active | Trending toward index funds |
| Index ETF history | Newer, fast-growing | Decades-established |
| My exposure | Korean-listed funds | Underlying US indexes |
The case against me — where indexing actually loses
I try to be honest about the weak points of my own approach, and this is one of the blog’s rules I take seriously: if I only ever show you the argument that favors what I already do, I’m not writing a finance blog, I’m writing an advertisement for myself.
So here’s the honest counter-argument. Stock picking can work spectacularly well. Warren Buffett’s early investment partnership in the 1950s and 60s beat the market by a wide margin for years before he pivoted toward buy-and-hold. Peter Lynch ran Fidelity’s Magellan Fund from 1977 to 1990 and outperformed nearly every professional in the industry for over a decade. In 2007, Buffett himself made a famous long-running bet that a plain S&P 500 index fund would beat a hand-picked basket of hedge funds over ten years — and won convincingly, which is usually told as a pro-indexing story, but it also proves the reverse point: somebody has to be good enough to make that bet with confidence in the first place.
The honest problem is survivorship bias. We remember Buffett and Lynch precisely because they’re exceptional — the handful who beat the odds over long careers. We spend far less time reading about the thousands of managers and individual investors who tried the same thing and quietly underperformed, closed their funds, or gave up. Every year, S&P Dow Jones Indices publishes its SPIVA scorecards comparing active funds against their benchmark indexes, and the pattern has been remarkably consistent: most active funds underperform their index over long horizons, particularly once fees are subtracted. Being one of the Buffetts is possible. Counting on being one of them is a different bet than most of us think we’re making.
The math: what one percentage point actually costs
Here’s where I stop arguing from history and start arguing from arithmetic, because this is the part that actually convinced me, years ago, more than any Buffett quote did.
Index funds are cheap because there’s almost no work involved in running them — no analyst team trying to out-think the market, just software that buys and holds. Many broad-market index ETFs, in both Korea and the US, now charge annual fees well under 0.1%, some under 0.05%. Actively managed equity funds typically charge somewhere in the 1%–2% range annually to fund the research and trading involved in trying to beat the market.
That difference sounds tiny. It compounds like anything but tiny.
Take a simple, purely illustrative example — not a prediction, just arithmetic. Assume $10,000 invested for 30 years at a 7% annual return before fees. One version pays a 0.05% annual fee (a typical low-cost index fund); the other pays a 1.00% annual fee (a typical actively managed fund). Nothing else about the two portfolios differs — same starting amount, same gross market return, same 30 years.
Over ten years the gap is modest — about $1,671. Over twenty, it’s $6,265. Over thirty, it’s $17,628 — the higher-fee portfolio ends up worth about 23% less, for identical market performance, purely because of what you paid to get it. Nobody had to be a worse stock-picker than anybody else for this gap to appear. The fee did all the work, quietly, every single year, while nobody was watching.
That’s the version of “picking stocks” I actually worry about — not buying the wrong company outright, but paying someone 1% a year to try to beat an index they usually don’t beat anyway.
FAQ
What’s the actual difference between an index fund and an ETF?
An index fund is a strategy — owning a broad slice of the market rather than picking names. An ETF (exchange-traded fund) is a structure — a fund that trades on an exchange like a stock, with a price that moves throughout the day. Most index funds today are sold as ETFs, but the two words aren’t strict synonyms; you can have an actively managed ETF, and you can have an index fund that isn’t structured as an ETF.
Do actively managed funds ever beat the index?
Yes — individual funds do, in individual years, and a smaller number do over long stretches too. The trouble is knowing in advance which ones will; sticking with the wrong guess costs money the whole time you’re wrong. The consistent finding from studies like the SPIVA scorecards is that most active funds don’t beat their benchmark over long periods, especially after fees — but “most” isn’t “all,” which is exactly why people get drawn back to stock picking every time the market makes a new high.
Is it too late to start index investing now that the market is at an all-time high?
The S&P 500 has made hundreds of new all-time highs over its history, and buying only on days that aren’t records would have meant sitting out of the market almost constantly, since new highs tend to cluster during long bull markets. Dollar-cost averaging — buying a fixed amount on a fixed schedule regardless of the headline — is built specifically to stop that question from mattering very much, because you’re never betting everything on any single day’s price.
Should I ever buy an individual stock at all?
That’s a personal-risk-tolerance question, not a math question, and I’m not going to tell you what to do with your own money. What I can tell you is what I actually do: I keep my “explore” money, if I have any, completely separate from my retirement accounts, and I’ve decided the accounts that fund my future aren’t the place I want to be testing my stock-picking skill.
Back to the boring part
None of this changes what I do on payday. My contribution to my index funds goes in on a fixed amount, on a fixed day, whether the market closed at a record high the day before or fell 2%. It went in through five months of a Fed chair transition earlier this year without a single change to the schedule. It’ll go in again this month, regardless of whether the KOSPI holds 7,000 or gives it back tomorrow.
I don’t think I’m smarter than the market. I’ve just done the arithmetic on what it costs to bet that I am, and decided I’d rather keep that percentage point for myself.
This is not investment advice.