Frequent Stock Trading Barely Raising Yields

A considerable number of individual stock investors have traded their stocks more frequently to raise yields, which have plummeted since the global financial crisis. Yet the more they trade, the less they gain.

The Dong-A Ilbo analyzed the investment patterns of individual stock investors holding accounts at 140 branches of four major brokerages in Seoul.

In the pre-global economic crisis period between September 2007 and July last year, the monthly turnover rate of individual investors was 76.1 percent. The figure, however, jumped to 81 percent in the post-crisis period between September last year and July this year.

In the pre-crisis period, average earnings declined 19 percent, falling more sharply than the nation’s benchmark stock index KOSPI, which tumbled 15.3 percent. In the post-crisis period, however, the average earning of individual stock investors was 16.4 percent, higher than the KOSPI’s 10.1 percent.

After the global financial crisis, the monthly turnover rate of individual stock investors jumped to 99.8 percent in the five Seoul districts of Seodaemun, Geumcheon, Eunpyeong, Dobong and Gangbuk. The five also paid the lowest amount of municipal tax out of the capital’s 24 districts.

The figure is almost two times larger than the 54.3 percent monthly turnover rate in six Seoul districts paying the most city tax -- Gangnam, Seocho, Songpa, Jongno, Jung and Yeongdeungpo. That means individual investors living in the previous five districts attempted to gain more profit by trading more frequently, but the average yield on stocks in the five areas was 13.7 percent, lower than the 16.4 percent of the highest districts.

Song Dong-geun, a manager at Daishin Securities, said, “Rich investors are usually undisturbed by developments in the stock market. On the other hand, general investors choose to trade more frequently, which finally results in a fall in yield.”

artemes@donga.com