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After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

asiae.co.kr

51–60 of 129 posts

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#51
post #49

I would be really interested to learn what the default advice for retail investors is across countries. In Germany the consensus is MSCI World or FTSE All-World ETFs. I believe in the US most advice goes to VTSAX (US Total Market), VOO (S&P500) and maybe QQQ (NASDAQ100) which means only US stocks. What gets recommended in other countries?

Disagree on that being the advice in the US. Most basic investment advice (and target-date funds) will use a three-fund portfolio containing US, ex-US, and bonds.

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#52
post #20

For those who don't know what's going on in Korea, KOSPI is up 3x in the last year and a large amount of HBM employees have made huge amounts of bonus pay. This has led to an insane FOMO frenzy in a society that's already very competitive. Add to that, stock gains in Korea are often used to finance housing purchases (or real estate investment) so many retail investors are scared of being "locked out" of housing (whic…

> housing (which is a requisite status symbol for dating or marriage

I get that culture is hard to change, but it still seems easier than changing the economics. There are men and women out there who presumably are interested in partnering up; at some point you'd think biology will take over irrespective of which achievements have been unlocked. What's stopping them?

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#53
post #49

I would be really interested to learn what the default advice for retail investors is across countries. In Germany the consensus is MSCI World or FTSE All-World ETFs. I believe in the US most advice goes to VTSAX (US Total Market), VOO (S&P500) and maybe QQQ (NASDAQ100) which means only US stocks. What gets recommended in other countries?

Generally the default fund in a decent 401(k) (employer managed but largely employee funded retirement plan) will be a "target date retirement fund" that contains a mix of equities and bonds according to the expected risk tolerance of someone at that age, and generally the equity component is also split between US and foreign equities.

e.g. Fidelity's fund for people planning to retire around 2050 https://fundresearch.fidelity.com/mutual-funds/summary/31579...

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#54

The problem isn't leveraged funds, it's margin on leveraged funds. Leveraged funds are the safest way for the average investor to get access to leverage because unlike margin there is no risk of margin calls, and your money generally won't go to zero unlike options which are vastly more complicated and can expire. The reality is that using leveraged funds (or any leverage) is a completely rational move because the av…

> Leveraged funds are the safest way for the average investor to get access to leverage

I... do not agree that leveraged funds are somehow a safest way to access leverage.

Every product including leverage has inherently a non-linear P&L. And from my experience, non sophisticated investors always struggle to grasp the implications of that. It makes returns (on capital) very path dependent, and very nasty during volatile regimes. It breaks the naive assumption of "well I could always hold and wait for the dust to settle".

> unlike margin there is no risk of margin calls

This is a bit of a weird statement. Leverage implies margin, you cannot make it disappear, the funding and associated risk has to come from somewhere, it's just that it is continuously applied, instead of fixed timings.

I do agree that it simplifies planning and reserve management though.

> even Warren Buffet made his biggest early wins on all-in bets.

This is a bit disingenious, note that Buffet did not use leverage...

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#55

Earlier quoted context omitted.

>It's impossible to have expensive real estate no it's very possible because in an aging country people relocate to a handful of cities. 50% of South Korea's population now lives in the Seoul metropolitan area. The real estate that's getting cheaper is the one decaying in the countryside. It's like saying Russia can't have expensive real estate because the country is big, what matters is where people are actually mov…

Cities in Australia consistently rank in the top 5 most expensive real estate indices and we ain't short of space here, it's just not many people are interested in living in a dusty Outback desert. And for many, if the property is not within 10km of the Sydney or Melbourne city centre, it might as well be in the dusty Outback desert.

I'd think Starlink will help change this. Not for living in the actual dusty Outback (which has its own risks/dangers/inconveniences), but for living in many other places in Australia that are lovely and not too far from desirable areas.

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#57
post #42

As a Korean, the reason people rush into stocks is simple: labor value has been completely destroyed. Realistically, it's nearly impossible for high income young people in their 20s and 30s to buy a house in Seoul. That forces them to move to the provinces, but then there's almost no infrastructure. No companies either. So many people turn to leverage in hopes of a life changing reversal. The recent rise in the KOSPI…

Can people live cheaply in the outskirts and work remotely for a foreign company? Or would that still not get you on track to be able to buy in/near Seoul?

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#58
post #20

For those who don't know what's going on in Korea, KOSPI is up 3x in the last year and a large amount of HBM employees have made huge amounts of bonus pay. This has led to an insane FOMO frenzy in a society that's already very competitive. Add to that, stock gains in Korea are often used to finance housing purchases (or real estate investment) so many retail investors are scared of being "locked out" of housing (whic…

With housing their being so cheap, what the hell is the problem anyway? It's impossible to have expensive real estate in a country that's dying out fast.

Housing is incredibly expensive. Roughly half of Korea lives and works in the Seoul metro area. The average salary is roughly 40,000 USD and the average apartment (maybe 84 square meters) is over 1 million USD.

Government efforts to cool housing inflation have resulted in a 40 percent minimum down payment for a mortgage.

Housing in Seoul and much of Gyeonggi is a pipe dream for most

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#59
post #54

The problem isn't leveraged funds, it's margin on leveraged funds. Leveraged funds are the safest way for the average investor to get access to leverage because unlike margin there is no risk of margin calls, and your money generally won't go to zero unlike options which are vastly more complicated and can expire. The reality is that using leveraged funds (or any leverage) is a completely rational move because the av…

> Leveraged funds are the safest way for the average investor to get access to leverage I... do not agree that leveraged funds are somehow a safest way to access leverage. Every product including leverage has inherently a non-linear P&L. And from my experience, non sophisticated investors always struggle to grasp the implications of that. It makes returns (on capital) very path dependent, and very nasty during volati…

Buffet funded his investments with insurance float

Re: After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted

#60
post #42

As a Korean, the reason people rush into stocks is simple: labor value has been completely destroyed. Realistically, it's nearly impossible for high income young people in their 20s and 30s to buy a house in Seoul. That forces them to move to the provinces, but then there's almost no infrastructure. No companies either. So many people turn to leverage in hopes of a life changing reversal. The recent rise in the KOSPI…

Can people live cheaply in the outskirts and work remotely for a foreign company? Or would that still not get you on track to be able to buy in/near Seoul?

English(lang) is the problem.

Korean and English have very different grammatical structures. I can read English in real time, but writing, listening, and speaking are difficult. (Maybe it'd be different if I were more proficient, but I've never lived abroad, so that's how it is.)

Because of that, remote work usually requires speaking, so most interviews end in rejection. I can communicate through chat, but the vast majority of employers want interviews.

And as the IT industry has grown and become more established, Korea has developed its own standards that diverge from global norms. This makes Korean IT hard to sell globally. I try to follow global standards, but in Korea, I'm told I'm using 'wrong technology' or doing 'over-engineering.'

Either way, the technology you learn or implement is often quite different—because the market leaders set the technical standards.

So independent developers in Korea have to learn both Korean IT standards and global standards—on top of English. (This is extremely painful.)

So if I could do remote work for a foreign company, it would be really, really great. But in reality, English is usually where things fall apart. Koreans often praise Korean as a 'scientific' language, but for most Koreans, it actually acts as a shackle. On the other hand, it's also because of this language that the domestic market is able to maintain at least a minimum level of viability.

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