“Sometimes it’s okay to turn it off when you encounter another world.”
This slogan from a 1999 SK Telecom advertisement featured top star Han Seok-kyu walking silently through a bamboo forest, providing viewers with a sense of healing. The ad effectively contrasted the constant ringing of mobile phones with the serene imagery of silence, maximizing its appeal.
The current extreme volatility in the stock market brings this advertisement to mind. The situation is so tumultuous that one might want to temporarily turn off their trading platforms.
The KOSPI index is experiencing unprecedented volatility. In June, investors faced two significant fluctuations reminiscent of a roller coaster ride. The first occurred from June 5 to 10, with the KOSPI's fluctuation rates at -5.54%, -8.29%, +8.18%, and -4.52%. The second wave of volatility happened from June 23 to 25, with rates of -9.99%, +3.26%, +5.42%, and -5.81%.
It’s important to note that the KOSPI is currently in the 8,000 to 9,000 range, not 2,000 to 3,000. A 10% change at 2,000 points means a 200-point fluctuation, while at 8,000 points, it equates to a staggering 800 points. As the index rises, the potential for sharp declines feels increasingly severe.
In July, this volatility continues to be a concern. On July 2, the KOSPI dropped more than 6% early in the trading session. This trend of fluctuation is likely to persist throughout the second half of the year, fueled by a significant influx of leveraged funds into the market. The recently launched single-stock leveraged ETFs, which have quickly gained popularity, exhibit remarkable daily fluctuations, oscillating between +30% and -30%.
It remains uncertain how many individual investors will survive or profit in such a volatile environment, as there are no precise statistics available. However, it is clear that greater fluctuations in the stock market correlate with increased opportunities and risks. While it may be an ideal time to take a breather, the temptation for significant gains can make it difficult to step back.
In times like these, it is wise to heed the words of investment sage Warren Buffett. His timeless investment principles are worth reflecting on:
"The first rule of investing is never lose money. The second rule is never forget rule number one."
"Be fearful when others are greedy and greedy when others are fearful."
"Risk comes from not knowing what you’re doing."
All of these pieces of advice emphasize the importance of risk management. Buffett’s warnings about being cautious when the market is overheated and avoiding herd mentality resonate strongly with investors navigating the current volatility in South Korea’s stock market.
In a recent interview following Berkshire Hathaway's annual shareholder meeting in early May, Buffett likened traditional value investing to a 'church' and speculative or gambling-like investments to a 'casino.' He cautioned:
"People can freely move between the church and the casino. While there are still more people in the church, the casino has become excessively attractive. The gambling mentality has never been stronger than it is now."
Behind the greatest bull market in history lies another world characterized by extreme volatility. Perhaps it’s time to consider turning off those trading platforms for a while.
* This article has been translated by AI.
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