Those who failed to invest feeling left out by seeing massive earnings of those who did

Posted on : 2021-01-12 17:34 KST Modified on : 2021-01-12 17:34 KST
Bull market has many questioning the value of their labor
The KOSPI crosses the 3,000 mark on Jan. 11. (Yonhap News)
The KOSPI crosses the 3,000 mark on Jan. 11. (Yonhap News)

Park Hyeong-geun, a 27-year-old graduate student, has the impression that everyone is buying stocks these days except for him. Most of the people in his circle — including friends and office colleagues — are talking about the stock market.

Even his mother and younger siblings, who didn’t know the first thing about stocks, have made quite a bit of money after watching YouTube channels about investing and sharing stock tips.

Hyeong-geun dabbled in the stock market last year, but not for long. “I took out my money because I thought the bubble was about to burst, but now I kind of regret doing so,” he said.

“I guess I’ll have to wait for a dip in the market.”

As stock prices continue to soar, Koreans are ailing from stock market fever. Stocks seem to be the only thing people are talking about these days.

Stories are often told of people making big money on the stock market. But at the same time, plenty of others fall into crushing debt because of poor investments or feel left out because they can’t afford to invest.

Kim Min-gyu, a 34-year-old stock investor, makes a pretty good salary, at 60 million won (US$54,596) a year. Even so, he took out a bank loan to buy stock last year. His logic was that he needed more seed money if he was going to profit from the bull market. Instead of using his salary to pay back his student loan, he invested it in stocks and earned five times the interest on the loan.

Kim uses YouTube and other online resources to study stocks. His father has also started investing in stocks again to raise money for his retirement — even though he was wiped out when stocks tanked during the global financial crisis of 2008.

Kim Tae-yeong, 29, a low-level government employee, took out a 30 million won (US$27,288) credit line at his bank last year. He felt that his disposable income wouldn’t be enough to maximize his profit.

Kim plans to grow his investment capital by taking out 2.5 million won (US$2,275) against his credit line each month, along with 30 million won (US$27,306) that he and his parents have pooled. He’s also learning how to invest in safe assets, such as bonds and US dollars, as a hedge against volatility.

What the two Kims hope to achieve through investing in the stock market is economic freedom — the freedom not to work, and to do as they please.

“I’d like to buy a little house somewhere in Gyeonggi Province and not have to worry about money. Rather than just getting by, I want to be able to choose how to live my life.”

“I spent so long preparing for the civil service exam, and my monthly salary doesn’t seem very rewarding. I’d like to just relax, without doing anything I don’t want to do.”

Some simply follow advice of acquaintances

Not all stock market investors hit the books before jumping into the market. There are quite a few impulsive investors who buy stocks recommended by friends or who jump on the bandwagon when a stock catches fire. A 27-year-old office worker surnamed Yun saw a 20% return on investment last month after buying some hot stocks that friends said they were buying.

That approach to investment typically carries a major risk of losing money. But in the kind of bull market we’re seeing right now, quite a few people like Yun are earning money, too.

Stocks’ impact goes beyond making money

“I broke up with the person I love after taking out 90 million won (US$81,894) of debt to buy stocks. Things are so tough right now — I have to go into the office on the weekends to make some extra money.”

“I got into a lot of debt because of stocks this year. I figured that just paying the mortgage on my house was too much of a vanilla lifestyle so I took out credit card loans [to invest in stocks]. Little did I know how my investments would bomb. Is there some way to restructure my debt?” The questions were posted on “Lawume,” a Naver community that focuses on debt rehabilitation.

“Quite a few of my clients are people who blew their money on Bitcoin and the stock market. Many of them took out unsecured loans for investments that represented a kind of escape from reality,” said Kim Gi-chang, the attorney behind Lawume, in a telephone interview with the Hankyoreh.

“There are even some people who start investing when they’ve already in debt,” Kim added.

Going into debt to invest and then trying to recover losses

Losing money on an investment makes it even harder to quit. People get even more obsessed as they try to make back their losses.

Woo, a housewife in her 50s, stopped trading stocks for a while after losing more than 50 million won (US$45,497) a year ago. But this year, she’s gotten back into it. She saw how stock prices soared after she sold her holdings in March 2020. She’s investing every day, with the goal of making 30,000 won (US$27) a day.

The stock craze can also be painful for those who can’t afford to take part, such as Choe Su-jin, a 30-year-old office worker. “Whenever I get any money, I have to set it aside for my rent and housing deposit, which doesn’t leave me any seed money. And since I’ve already taken out a bank loan, I’m afraid of taking out another loan to invest in stocks.”

“Sometimes, I think I ought to have cashed in my time deposit and invested in Celltrion. But I just can’t bring myself to do it, because losing that money would wipe out my safety net,” Choe said.

A 30-year-old independent contractor surnamed Jin has seen income drop sharply during the pandemic, with clients offering less work. “Everyone seems to be making money on the stock market these days. It’s really discouraging to be apparently the only person who’s just scraping by.”

“I barely have enough money to pay my living expenses and rent, so how am I supposed to invest, even when I know stock prices are going to go up?” Jin complained.

FOMO mentality

Every few years, there’s another stock craze. In 2000, people went wild over startups; in 2007, it was mutual funds, and in 2009, it was the recovery from the global financial crisis. And every time, including this year, people have joked that everyone’s striking it rich except for them.

This is an example of the FOMO mentality, short for “fear of missing out.” People jump into investing, afraid that they’re the only ones missing out on a good opportunity.

The overall rise in various asset classes, including real estate, bitcoin, and stocks, has caused ordinary people to think of themselves as “nouveau pauvre,” or newly poor (a play on “nouveau riche”).

“While individual earnings depend on which stocks you invested in, the upward movement of the index as a whole suggests that rising stock prices have exacerbated the polarization of wealth,” said Lee Jeong-hwan, a professor of economics and finance at Hanyang University.

“Last year in particular there was a major opportunity to enter the stock market, which created a disparity between those who took that opportunity and those who didn’t,” Lee said.

By Shin Da-eun, staff reporter

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