Investing Aggressively in Stability

There is no shortage of famous advice about investing.

Hold good businesses for a long time. Invest when others are fearful. And never underestimate the danger of investing with borrowed money.

I do not think those warnings are wrong. If anything, experience has helped me understand them better.

Still, there is something about my own approach that may sound contradictory.

I prefer relatively stable investments: assets that have generated earnings over time, distribute income, and, ideally, have room to increase those distributions.

At the same time, I make extensive use of borrowing.

Seeking stability while carrying substantial debt may sound strange. Yet that tension is precisely where my investment philosophy begins.

Buying a good asset at a good price

“Price is what you pay; value is what you get.”
— Benjamin Graham's lesson, quoted in Warren Buffett's 2008 shareholder letter

When I first took an interest in investing, property was more familiar to me than stocks.

I explored commercial property and officetels—Korean buildings commonly used as residences or offices—because regular rental income appealed to me.

But direct ownership meant thinking about vacancies, taxes, and maintenance. With so much money concentrated in one property, it was also difficult to buy in smaller portions or sell just part of the investment.

That led me to REITs and eventually dividend-paying stocks. I found it interesting that I could participate in income from property without owning a building outright.

Later, I became interested in businesses that had a record of increasing dividends.

Even a good asset is not a good investment at every price. If the dividend remains the same, buying at a lower price increases the dividend yield on the purchase cost.

Of course, a lower price may reflect serious problems. If the underlying business is deteriorating, an unusually high yield may be a warning rather than an opportunity.

It is not the headline yield alone that matters to me.

I want to buy assets capable of generating income over time, at a reasonable price. That is where my idea of stability starts.

Wanting to make the most of compounding

“Our favorite holding period is forever.”
— Warren Buffett's 1988 shareholder letter

Buffett attached a condition to that thought: he was talking about outstanding businesses with outstanding management.

I also value holding worthwhile assets for the long term.

My interest in dividend growth made me think more deeply about compounding: receiving dividends, reinvesting them, holding more of an asset, and potentially earning additional income from those holdings.

Dividends alone do not create compounding. Reinvestment and the subsequent performance of the asset matter.

But the process raised a question for me.

If compounding can become more powerful over time, would starting with more invested capital make a difference?

Investing savings regularly over many years is a perfectly sensible approach. I simply became interested not only in how long capital stays invested, but also in how much capital is at work during those years.

That led me to reconsider debt.

Is repaying a loan quickly always best?

I did not always think of borrowing as a way to manage capital.

In fact, I initially believed the best thing to do was repay debt as quickly as possible.

That is why I chose equal-principal payments for my first mortgage. Paying down the balance more quickly could reduce interest costs, and each smaller balance felt reassuring.

Later I experienced rising rates and learned how much the duration of discounted rates and the actual loan terms matter.

Is repaying principal quickly always the best choice?

Repayment saves future interest, while investing money instead might earn more—or lose value. It is a comparison between a relatively certain cost saving and an uncertain investment return.

Over time, I began to pay more attention to my required monthly payments and the cash I could keep available, not just how fast the balance declined.

Why did Buffett warn against borrowing to invest?

“Risking what you have and need to obtain what you do not need is insane.”
— Paraphrased from Warren Buffett's 2017 shareholder letter

Buffett has long been cautious about leverage. Nobody knows how far shares can fall in the short term, and borrowed money can force decisions at the worst possible moment.

With unleveraged investments, a person may be able to wait through a decline. With debt, interest payments continue. Maturity dates or collateral requirements may force a sale before the investor wants one.

Does that mean my approach is necessarily wrong?

Interestingly, Buffett did acknowledge the mathematics of leverage. At Berkshire Hathaway's 2019 annual meeting, he said that leveraged equity investing could produce extraordinary returns if an investor had the staying power to get through market declines. In the same answer, he described seeing even brilliant investors destroyed by leverage and made clear that Berkshire would not pursue that path. (2019 annual-meeting transcript)

The possibility of higher returns and the wisdom of taking the risk are two separate questions.

I use borrowing quite aggressively

In practice, I make substantial use of loans. That does not mean I think the approach suits everyone.

Time matters to me. Compounding develops over a long period, and I see a potential case for deploying capital earlier when the debt obligations remain manageable.

Borrowing does not change how compounding works, though. It increases the scale of the exposure—and also the losses and interest costs that may follow.

Consider investing 100 million won of your own money versus investing 200 million won after borrowing another 100 million. A 10% rise produces gains of 10 million and 20 million won respectively; a 10% fall produces losses on the same scale. The leveraged investor also owes interest.

That is why I believe the more leverage I take on, the more carefully I should choose assets.

Rather than chasing uncertain, dramatic returns, I look first at assets with a history of generating income. That explains my interest in dividend-growth businesses and REITs, neither of which is immune to price declines or distribution cuts.

Even if distributions appear to cover the interest bill, that alone does not make an investment profitable. Asset values, taxes, principal repayments, and liquidity all matter.

I want to understand the costs and risks of debt and, within what I can withstand, give income-producing assets more time to work.

Using a lot of debt makes it even more important to think about what happens if my assumptions turn out to be wrong.

What matters more than a large dividend

At one point, I was also drawn to investments making large and frequent distributions. Cash arriving monthly or weekly is appealing.

But a large distribution is not the same as a high total return. If the underlying asset loses more value than it distributes, the overall result may be disappointing.

Debt makes this distinction even more important: income distributions can shrink, while interest and repayment obligations remain.

These days, I want to understand not only the size of a payment but where it comes from and whether it is sustainable.

My goal is not simply to collect the largest possible dividend. I want to reinvest cash flow and, over time, grow net worth—not just the gross value of assets before debts.

Investing aggressively in stability

In his 2019 comments, Buffett's acknowledgment of the return potential of leverage came with a vital condition: the ability to remain invested through a downturn.

Compounding needs time. If I cannot stay invested long enough, even a good asset may never deliver what I hoped for.

It is understandable that many investors who value stability choose to reduce debt and risk. My preference has developed in a different direction.

Rather than searching for risky assets promising spectacular returns, I prefer putting more capital into assets I judge to be relatively stable and holding them for a long time.

Conservative in my choice of assets, aggressive in my use of capital.

Of course, choosing a relatively stable asset does not make a leveraged position safe. I have to consider whether I could cope with rising interest rates, falling income, and lower asset prices at the same time.

I do not know whether this judgment will still feel right in the future. It is a philosophy formed from my experiences, not a universal rule or advice for anyone else.

But if I were to leave a single sentence describing how I think today, it would be this:

I invest aggressively in stability.

It may sound like a contradiction. I value the time that compounding requires, and I use borrowing because I want more capital at work during that time.

And precisely because I use debt so actively, I try to be more deliberate about what I invest in.

That is how I think about investing today.

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This is a record of my own experiences and reflections, not a recommendation to buy any financial product or invest with borrowed money. Quotations are translated or paraphrased where noted; the linked sources provide the original context.