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Experts: Small Investors Making Less

Posted June. 13, 2006 03:08,   


Park (48), an individual investor, invested around 70 million won in stocks of a cosmetic company last year. He still maintained those stocks for over a year, but their current appraised value stays at 20 million won. He lost 60% of his investment money.

Park said, “I acted on experts’ advice on long-term investment and waited for over a year. But the stock prices keep falling. I’ve done nothing wrong and I don’t understand why.”

However, experts don’t agree.

Jang Jin-wu, an investment expert of Samsung Financial Network pointed out, “There are many investors who lost the timing of a stop-market order and are waiting for the principal to recover endlessly. That is not a long-term investment.”

A lot of individual investors consider themselves good long-term investors like Park, while engaged in the wrong long-term investment. Therefore, there are many investors who repeat a similar pattern of investment and lose lots of money.

Jang, who analyzed Park’s investment pattern, diagnosed him as an investor who should not invest in stocks in person.

It turns out that nine of ten high-net-worth individual investors should not invest in stocks in person like Park due to a lack of basic knowledge and investment techniques.

The Samsung Financial Network surveyed 2,270 customers with more than 50 million won of account balances. The survey results said that only 236 of them, or 10.40%, have enough knowledge and proper investment strategies to invest in person.

On the other hand, the number of those who should never manage their own investment amounted to 1,061 or 46.74%, and that of those who are not expected to have good results if they handle investment themselves was 973 or 42.86%.

Earning rates show the fact that individual investors have produced much less profit in direct investment than foreigners or institutional investors have.

According to the Korea Exchange, individual investors suffered a loss of 12.19% of earning rates in exchange on May 11-26 when stock prices plummeted, while institutional investors lost 9.13% and foreign investors lost -8.43%.

Experts said that it is very unlikely for housewives or those who have regular jobs to make profits from direct stock investment.

Jang advised, “Many customers put themselves into direct investment to make money when stock prices jumped last year. It is desirable to entrust experts through indirect investment since direct investment has a high risk of loss.

Wan-Bae Lee roryrery@donga.com