Korean retail investors struggle to cut losses, holding on to or buying more losing stocks

A recent survey of Korean retail investors has revealed that two-thirds of them are struggling to cut their losses by either holding onto losing stocks or buying more of them in an attempt to lower their average purchase price. This behavior, as reported by financial research institute Toss Insight, was observed in an online survey conducted from July 11 to August 21, 2021, among 1,000 individuals aged 20 to 50 who have experience investing in both domestic and overseas stocks.

Out of the respondents, 42.2% admitted to continuing to hold onto their losing stocks, while 24.4% decided to purchase more shares in order to bring down their average purchase price. Interestingly, the survey also found that investors who adhered to predetermined rules for cutting their losses were less likely to report any losses in their stocks. Specifically, over the past year, only 26.5% of investors who followed such rules reported losses, compared to 41.7% among those who continued to hold onto losing stocks.

Moreover, the survey shed light on a discrepancy between investors' stated risk tolerance and their actual exposure to risk. Among those who identified themselves as "conservative" investors, 66% were found to have taken on high-risk positions.