Caution for Small-Scale “Debt Investors” in Their 20s: Loss Rate 3.2 Times Higher Than Average Individual Investors

Average Return on Margin Loan Accounts at -19%
2.3 Times Greater Loss Than Non-Users

This month, the scale of losses among individual investors engaging in so-called “debt investment” using margin loans has increased.

According to the financial sector and regulators on March 22, an analysis of approximately 4.6 million individual investment accounts at two major domestic securities firms showed that, as of the 9th of this month, the average rate of return per account for investors using margin loans was -19.0%. For investors who did not use margin loans, the rate of return was -8.2%.

By age group, the returns for “debt investment” investors were as follows: those in their 60s recorded -19.8%, those in their 30s -18.2%, and those in their 20s -17.8%. Losses were more pronounced among older investors.

However, the gap between margin loan users and non-users was wider among investors in their 20s and 30s. For those in their 30s, the rate of return for accounts without margin loans (-6.6%) was the highest among all age groups. For margin loan users in their 30s, the loss rate was 2.8 times higher. Among those in their 20s, margin loan users experienced a loss rate 2.7 times greater than non-users (-6.7%). For investors in their 60s and 70s, the gap was 2.2 times in both cases, while for those in their 50s, the gap was the smallest at 1.9 times.

Among small-scale investors, the gap in loss rates between margin loan users and non-users was even greater. For accounts with investments under 10 million won, the rate of return for margin loan users was -20.7%, which is 2.8 times lower than the -7.5% return for non-users. In particular, among investors in their 20s with small investments, the loss rate for margin loan users was 3.2 times higher, representing the largest disparity. This is interpreted as a result of younger margin loan investors tending to concentrate their investments on a few stocks—a practice known as “all-in investing.” Similar trends were observed during the bull market in 2022.

Financial authorities believe that, since the size of margin loans is only 0.6% of total market capitalization (as of March 6), the risk of this spreading to the broader market is limited. However, they have instructed securities firms to strengthen guidance on the risks of leveraged investing, and have called for a review of risk management systems related to margin loans and contracts for difference (CFDs). Additionally, the Financial Supervisory Service plans to examine all potential sources of “debt investment” across the financial sector, including stock loans, where capital firms provide loans using securities accounts as collateral.

Meanwhile, experts emphasize the importance of following basic principles when investing in stocks: only invest surplus funds, avoid expecting windfall profits, invest for the long term, and practice diversification.

This content was produced with the assistance of AI translation services.