[Edaily Reporter Kwon Oh Seok ] As the single-stock leveraged ETFs (Exchange-Traded Funds) listed on SamsungElectronics(005930)and SK hynix(000660)marked four months since their listing on the 27th, the yield gap with the underlying assets is widening day by day, causing losses for individual investors to snowball. Since leveraged ETFs track daily returns at twice the rate rather than cumulative returns over a period, investors cannot avoid the “negative compounding effect”—where the value of their assets erodes—as stock prices move sideways or fluctuate repeatedly. Consequently, retail investors who were unable to sell during the sharp market decline since last July and have been left stuck with their holdings—averaging 17 trading days—are reluctantly stuck in a quagmire of long-term holding.

Earlier, in June, as price volatility in leveraged products increased, the Financial Supervisory Service issued a consumer alert, stating, “Since single-stock leveraged products are structured to track a multiple of the daily return, the total return over the holding period may not match twice the period return of the underlying asset due to the ‘negative compounding effect.’” It emphasized that “investors must first understand the structural risks rather than focusing on short-term capital gains.”
The negative compounding effect refers to a phenomenon in which stock prices continue to decline cumulatively, leading to mounting losses, even if the index recovers. For example, if the underlying asset rises by 30% and then falls by 30%, a 1x product would rise from 100 won to 130 won and then fall to 91 won, resulting in a 9% loss. However, in the case of a 2x leveraged ETF, the price would rise from 100 won to 160 won and then fall to 64 won, resulting in a total loss of 36%.
The longer the market remains range-bound—with stock prices repeatedly rising and falling—the more the negative compounding effect is bound to intensify. Given that the daily price limit for domestic stocks is ±30%, a maximum loss of 60% is theoretically possible in a single day, which could lead to a sharp decline in asset value.
In fact, during the 83 trading days from May 27—the listing date of single-stock leveraged ETFs—through the 23rd of this month, the underlying shares of SamsungElectronics and SK hynix fell by only 4.52% and 9.26%, respectively, while single-stock leveraged products plummeted by at least 30% to as much as 50% over the same period. As a result, a growing number of retail investors who entered the market relying solely on the upward trend of domestic semiconductor stocks are now stuck holding these positions—unable to bring themselves to cut their losses as they face mounting losses.
According to data submitted by the Korea Exchange to the office of Rep. Kim Yong-man of the Democratic Party of Korea—a member of the National Assembly’s Political Affairs Committee—market trading patterns have shifted dramatically since financial authorities introduced regulations on July 31, including raising the minimum margin requirement for single-stock leverage and inverse products from the previous “10 million won” (including substitute securities) to “30 million won in cash.”
In particular, the sharp decline in the daily average turnover rate warrants attention. According to Rep. Kim’s office, the daily average turnover rate for 14 leveraged single-stock ETFs fell from 43.6% in the month prior to the regulations taking effect to 5.9% in the month following their implementation, dropping to a single-digit figure. Turnover rate is an indicator that measures how many times ownership has changed relative to the total number of listed shares over a specific period, serving as a gauge of market trading activity.
When this turnover rate is recalculated to reflect the average holding period for investors, it becomes clear that the average holding period increased significantly before and after the regulations took effect. Before the regulations, the average holding period was approximately 2.3 days, with ultra-short-term day trading dominating the market; however, after the regulations, the holding period increased to about 16.9 days—more than seven times longer. The daily average turnover rate for the two “Inverse 2X” ETFs also plummeted from 1,110.4% to 125.0%. This indicates that retail investors, who were left holding the losses after short-term traders exited the market, were unable to sell their shares and were forced into long-term holdings.
Financial authorities and experts strongly warn that single-stock leveraged ETFs should never be used as a long-term investment vehicle based on the expectation of an upward trend. In its “ETF Investment Guide” report, KB Asset Management advised, “These should be used solely for short-term betting during brief periods with a clear trend,” adding, “Since the risk of loss increases due to the negative compounding effect of volatility during long-term holding, investors should review their positions frequently as the holding period lengthens.”