Day traders with high turnovers ended up losing most last year

[Source : Gettyimagesbank]

Individual investors’ losses from their investments in the stock market last year were bigger than the actual drop in domestic and overseas stock markets indices because of the weak global market on concerns of economic recession and high inflation.

On Wednesday, NH Investment & Securities Co. disclosed the result of its study on investment returns for the 2,452,443 individual accounts that traded in domestic stocks between Jan. 3 and Dec. 29, 2022, which found that they suffered an average loss of 25.4 percent in domestic stocks. This is larger than the 24.9 percent decline of the Korea Composite Stock Price Index last year. Even 407,605 individual accounts that traded in overseas stocks suffered an average loss of 34.6 percent during the same period, which is greater than S&P 500’s decline of 19.4 percent and that of the tech stand-in Nasdaq Composite Index at 33.1 percent.

As for the transaction itself, domestic stock investors were much more active. Last year, their average turnover ratio was 501 percent, while it was 351 percent for those who traded in overseas stocks. The turnover ratio is a measure of how often an investor buys and sells stocks and a higher turnover means more day trading.

Individual investors with a higher turnover rate tended to suffer greater losses. “A high turnover rate indicates a high degree of confidence in the ability to catch up with the market flow or a great deal of anxiety over the market,” Pyun Deuk-hyun, a senior analyst at NH Investment & Securities WM Masters, said. “It seems investors in their 40s and 50s were more confident based on more experience and money.”

By generation, investors in their 40s and 50s had higher turnover rates with lower returns than those in their 20s and 30s. Last year, those under 20s performed best in the domestic stock market with a negative return of 24.4 percent, followed by 20s and 30s. Investors in 50s and 40s suffered the biggest losses.

The turnover rate was the lowest for investors in their 20s at 275 percent, followed by those in their 20s at 449 percent and 30s at 467 percent. Those in their 50s and 60s had the highest turnover rate.

Overseas stock investors showed a similar investment pattern. In the overseas stock market last year, those in their 60s and older and 20s faired best with a negative 33.5 percent and negative 33.6 percent, respectively, followed by those in their 20s and 30s. The 50s and 40s suffered the most. Again, the turnover rate was lower among 20s and 30s at 340 percent and higher among 40s and 50s at 370 percent.