By Yoon Ja-young
It is no secret that small investors perform poorly in the stock market. Data shows that this year is no exception despite rising stock indices.
According to the Korea Exchange, the country's stock market operator, the price of the five stocks small investors bought most fell on average 20.5 percent this year.
Hyundai Motors, for instance, which small investors bought most this year, saw its price fall 20.1 percent to 135,000 won from 169,000 won.
POSCO, the next stock on the list, fell 19.9 percent, and LG Electronics, the third most-preferred stock, lost 15.7 percent. LG Display and Daewoo Shipbuilding and Marine Engineering, also among the small investors' top-five picks, fell more than 20 percent.
The top-five picks of institutional investors rose, on average, 21.8 percent this year. Though Hyundai Glovis, which they bought most, fell 32.1 percent from earlier this year, their second-best pick, Shinsegae, rose 52.6 percent. SK Innovation, the third stock they bought most, gained 51.2 percent. Their fourth-best pick, SK, rose 23.6 percent.
LG Chem, which foreigners bought most, rose 53.6 percent, and Korea Electric Power, their fourth-best pick, rose 5.9 percent. The top-five picks by foreign investors rose on average 4.9 percent.
Analysts said small investors tended to buy large shares when their prices started to fall, thinking they had become cheap. They also sold shares too quickly on small gains, while institutional investors and foreign investors made investment decisions based on a mid to long-term perspective.
The bad trading pattern of small investors also was evident in the tech-loaded KOSDAQ market. According to a Korea Capital Market Institute analysis, the KOSDAQ stocks small investors sold most recorded a near-40 percent return during a four-month period, while shares they bought most rose only 10 percent.
"When considering that small investors have less access to information and are inferior in risk management, it is natural that they perform poorly in stock investment," said Hwang Sei-woon, a research fellow at the institute.
Kim Hyo-jin, an analyst at Kyobo Securities, said investors should make decisions based on the data.
"To determine the corporate value, investors should check the financial statements," she said. "The major indices, such as price-earnings ratio (PER), price book-value ratio (PBR), profitability, growth, stability and liquidity ratio all reflect the competitiveness of the business.
"They should examine not only these numbers but also what is behind the numbers and how they will turn in the future."
It is no secret that small investors perform poorly in the stock market. Data shows that this year is no exception despite rising stock indices.
According to the Korea Exchange, the country's stock market operator, the price of the five stocks small investors bought most fell on average 20.5 percent this year.
Hyundai Motors, for instance, which small investors bought most this year, saw its price fall 20.1 percent to 135,000 won from 169,000 won.
POSCO, the next stock on the list, fell 19.9 percent, and LG Electronics, the third most-preferred stock, lost 15.7 percent. LG Display and Daewoo Shipbuilding and Marine Engineering, also among the small investors' top-five picks, fell more than 20 percent.
The top-five picks of institutional investors rose, on average, 21.8 percent this year. Though Hyundai Glovis, which they bought most, fell 32.1 percent from earlier this year, their second-best pick, Shinsegae, rose 52.6 percent. SK Innovation, the third stock they bought most, gained 51.2 percent. Their fourth-best pick, SK, rose 23.6 percent.
LG Chem, which foreigners bought most, rose 53.6 percent, and Korea Electric Power, their fourth-best pick, rose 5.9 percent. The top-five picks by foreign investors rose on average 4.9 percent.
Analysts said small investors tended to buy large shares when their prices started to fall, thinking they had become cheap. They also sold shares too quickly on small gains, while institutional investors and foreign investors made investment decisions based on a mid to long-term perspective.
The bad trading pattern of small investors also was evident in the tech-loaded KOSDAQ market. According to a Korea Capital Market Institute analysis, the KOSDAQ stocks small investors sold most recorded a near-40 percent return during a four-month period, while shares they bought most rose only 10 percent.
"When considering that small investors have less access to information and are inferior in risk management, it is natural that they perform poorly in stock investment," said Hwang Sei-woon, a research fellow at the institute.
Kim Hyo-jin, an analyst at Kyobo Securities, said investors should make decisions based on the data.
"To determine the corporate value, investors should check the financial statements," she said. "The major indices, such as price-earnings ratio (PER), price book-value ratio (PBR), profitability, growth, stability and liquidity ratio all reflect the competitiveness of the business.
"They should examine not only these numbers but also what is behind the numbers and how they will turn in the future."
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