KOSPI has fluctuated around the 7000 mark, but individual investors have reported disappointing performance. This is attributed to a pattern of buying stocks late after prices rise and withdrawing funds as corrections begin, a phenomenon known as "timing mismatch investment."
According to data from the Korea Exchange on net purchases by investors, individual investors recorded a "timing gap" of -4.5% from the beginning of the year until September 22. This is the second-lowest level since 1998, following 1999's -4.65%.
The timing gap measures the difference between the average KOSPI on days when individuals sold stocks and the average KOSPI on days when they bought, divided by the annual average KOSPI. A negative figure indicates that individuals bought on relatively high index days and sold on lower days.
This year's sharp market rise has led to a surge in individual buying. Notably, individuals net purchased 89.9 trillion won when the KOSPI averaged 7224.8. In May and June, they bought 77.5 trillion won at an average of 7994.9, significantly increasing their buying during the bullish market.
However, as the market has recently corrected, individual funds have been rapidly exiting. According to Shin Young Securities, 13.5 trillion won was withdrawn from direct investments in the domestic market in August. In September, up to September 18, an additional 9.83 trillion won left the market. In less than two months, over 23 trillion won has exited the stock market.
Funds surrounding the stock market are also decreasing. The Korea Financial Investment Association reported that as of September 18, investor deposits stood at 98.3 trillion won, down about 41 trillion won from the year's peak of 139.7 trillion won on June 4.
"Investors Bought High and Sold Low"
Typically, individual investors tend to enter the market after prices have risen, often engaging in "averaging down" to lower their average purchase price during initial corrections, which usually leads to continued fund inflows.However, this time, funds are exiting alongside market corrections. Analysts suggest that individuals who bought at high prices are leaving the market instead of making additional purchases as volatility increases.
Kim Hak-kyun, head of research at Shin Young Securities, noted at a recent meeting at the Korea Exchange that it is unusual for funds to exit immediately after a correction, contrasting with the typical pattern of delayed inflows during price increases and initial corrections.
As individual investment capacity diminishes, there are concerns that foreign influence on the domestic market supply and demand may increase. Conversely, despite a decrease in cash reserves, the balance of margin trading remains high, raising fears that individual losses could grow if volatility expands.
Experts advise caution against chasing stocks that have rapidly surged in a bullish market. Even if the index rises in the long term, the timing of purchases and the choice of stocks can significantly affect the returns experienced by individual investors.
A securities industry source stated, "As the market rises quickly, more investors will inevitably enter late in pursuit of returns. It is crucial to focus on diversified investments that align with investment duration and risk tolerance rather than trying to predict short-term market direction."
* This article has been translated by AI.
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