Retail Investor's 10 Years of Savings Shrink From 400 Million Won to 100 Million
400 million won saved over a decade shrank to 100 million in just six months. That is the story posted by a 30-something office worker on Blind, an anonymous workplace community. According to the post, the worker put a net worth of 400 million won — accumulated through instruments like time deposits — into SK Hynix and 2x leveraged products (which borrow twice the original investment to double both gains and losses) during the semiconductor stock surge in May and June, only to lose 300 million won.
Last month, data from 10 major brokerages showed retail investors' realized and unrealized losses on single-stock leveraged products exceeding 6.3 trillion won, as leveraged losses spread across retail investors as a whole. The securities industry is clamping down. In July, financial authorities raised the minimum margin deposit for single-stock leverage to 30 million won and made mock trading mandatory. Daishin Securities will block new leveraged and derivatives trading by minors and people aged 80 and older starting at the end of this month. Mirae Asset Securities has also restricted online registration for leveraged and derivatives products by minors.
Yet leveraged losses have appeared regardless of age barriers. According to brokerage data, the age group with the largest leveraged losses was neither those in their 80s nor minors, but those in their 40s. The office worker who lost a decade's savings was in his 30s.
As regulatory thresholds rise, a balloon effect is emerging, with money flowing into the regulatory blind spot of the U.S. market. Once an overseas stock account is opened, investors — unlike in Korea — face virtually no restrictions and can buy not only 2x but even 3x high-leverage exchange-traded funds (ETFs). In fact, even amid the recent correction in U.S. markets, 2x and 3x leveraged products on U.S. tech and semiconductor stocks rank among the top net purchases by Korean retail investors in overseas stocks.
Many investors mistakenly see leverage as a shortcut to doubling returns. But leveraged products harbor a mathematical trap absent from ordinary stocks: negative compounding, in which principal erodes as prices rise and fall, along with a distorted principal recovery rate. A stock that starts at 1 million won and rises 10% one day then falls 10% the next ends up at 990,000 won. A 2x leveraged product that rises 20% to 1.2 million won and then drops 20% the next day sinks to 960,000 won. The underlying asset stands still, yet 4% of the leveraged account evaporates on the spot.
The trap deepens in a downturn. With ordinary stocks, a 100% gain after a 50% loss restores the original investment, but with a 2x leveraged product, the account can melt by more than half even if the underlying asset falls just 30% from its peak. Even if the underlying asset fully recovers to its peak, the leveraged account remains in the red — a perverse phenomenon. NH Investment & Securities excluded leveraged products from its installment purchase options for precisely these structural risks.
The author of the Blind post said that losses exceeded 40% within just three days, leaving him unable even to cut his losses, and that he is receiving treatment for depression and anxiety. It is a case where the cost of leveraged losses went beyond money.
