Since August, the A-share market has shown signs of recovery, yet volatility remains elevated following the clearance of leveraged positions, with repeated market fluctuations. While the technology sector has seen a relatively prominent phased rebound, its sustainability is still uncertain, and sector rotation remains a clear feature, warranting caution against chasing gains. ETFs have drawn attention from many retail investors for asset allocation, thanks to their high transparency, convenient trading, and low fees. In practice, however, many investors devote significant energy to the “how to buy” question, overlooking more critical considerations: “what money to use” and “how much to buy.” The three disciplines—avoiding leverage, using idle funds, and controlling position size—should not only be remembered when markets fall.
Beware of Leverage: Don’t Lose Your Seat in the Market
In May 2026, the Korea Exchange launched single-stock 2x leveraged ETFs tracking Samsung Electronics and SK Hynix. Within just over a month, this triggered a market-wide “leverage stampede.” According to data from the Financial Supervisory Service (FSS), on July 13 alone, over 1.2 million leveraged accounts hit margin call thresholds, with 320,000 to 460,000 accounts fully force-liquidated by brokerages, wiping out their principal. Strikingly, shortly after this massive clearance of leveraged funds, the underlying assets staged a phased recovery—but those liquidated investors lost the chance to participate in the rebound. This is the cruelty of leverage: it strips investors of their ability to stay in the game during volatility, rather than merely testing their judgment in trends. Note: Case data is sourced from the FSS and public market information, referencing media reports such as The Paper and 21st Century Business Herald. Korean market trading and risk rules differ significantly from A-shares; this overseas case serves only as a warning about leverage risks and should not be directly compared to the A-share market. A-share leveraged tools also carry margin call and forced liquidation risks; retail investors are advised to avoid leveraged products altogether.
Beyond leverage risk, another equally important issue is how much to allocate to sector ETFs and how to structure that allocation.
Sector ETFs as Satellites, Not Core Holdings
Historical market patterns show that certain sector ETFs, particularly in technology, exhibit high beta and high volatility, making them more suitable as “satellite” positions in a portfolio rather than “core” holdings to be heavily weighted. What is the “core-satellite” allocation strategy? The core position acts as the portfolio’s ballast, typically composed of broad-based index ETFs such as the CSI 300 or CSI A500. This capital seeks the market’s long-term average return, maintaining a steady style with no need for frequent trading. The satellite position serves as the portfolio’s offensive spear, allowing allocation to preferred sector or thematic ETFs, targeting excess returns relative to the market while accepting higher volatility. Even satellite positions require phased entry rather than a one-time concentrated purchase. There is no universal standard for the exact ratio between core and satellite positions. Each investor’s goals, risk tolerance, and investment horizon differ, so the split must be tailored to individual circumstances. Note: This mention of the “core-satellite” strategy and broad-based ETF examples is purely for investor education, constituting no investment advice or standardized allocation plan. Investors should assess their own situations prudently and decide independently; funds carry risks, and investment requires caution.
Why are sector ETFs unsuitable as core holdings? The reason is simple: even sectors with promising growth prospects can experience significant drawdowns. During the July market correction, the communications equipment index and semiconductor equipment index both saw sharp short-term pullbacks. If an investor concentrates most of their capital in a single sector, an industry-wide downturn would put enormous pressure on the account, making it difficult to hold positions calmly. Having addressed the “how much to buy” question, we now turn to “what money to use”—both are equally critical.
Three-Bucket Family Funds: Every Dollar Has Its Role
After discussing leverage and position sizing, let’s address “idle money investing.” Many investors interpret “idle money” as “money not currently needed,” but that judgment of “currently” can shift with market volatility. A more prudent approach is to clearly divide family funds by purpose and time horizon. The first bucket: living expenses. This covers daily spending, mortgage or car loans, children’s education, and medical costs, corresponding to 6–12 months of essential living expenses. The core requirement here is safety and liquidity—ready access at any time. This money should not enter any volatile equity investment; its best destinations are bank deposits, money market funds, and other low-risk products. The second bucket: emergency reserves. This is set aside for unexpected events such as illness or accidents, serving as the family’s safety net. Its primary role is protection, not returns. Without this safeguard, market volatility could easily translate into a life crisis. The third bucket: investment capital. This is the true “idle money” available for equity investments after the first two buckets are fully funded. Its defining characteristic: even if losses occur, daily family life remains unaffected. Additionally, this capital has no short-term time targets and can be planned as “long money” for long-term allocation. Only this bucket is suitable for entering volatile markets like stocks and ETFs. Even this capital requires position management—using phased entry and a “core-satellite” approach to balance returns and risk.
Positive Leverage in Life
Leverage in investing is fraught with risk, but in daily life, we can harness positive “leverage” with no liquidation risk. During market downturns, self-deprecating jokes circulate online, with some quipping about “3x long housework” or “3x long health.” While humorous, these remarks reflect a clear-eyed life wisdom. Allocate time to life itself—30 minutes of daily exercise leverages sweat into health; a book per week leverages time into knowledge; a quarterly family trip leverages companionship into warmth. A well-rounded life also helps us face investment ups and downs with greater equanimity.
Final Thoughts
The current technology recovery rally may not be smooth, but the medium- to long-term direction of industrial development deserves attention, with AI-related industries continuing to evolve. For retail investors, viewing sector investments is more about building a rational understanding of China’s long-term technology industry development than fixating on any single investment target. This rational understanding must be carried by “idle money,” safeguarded by “patience,” and implemented through “position management.” Risk disclaimer: This article is for investor education only and does not constitute investment advice. Historical index performance does not guarantee future returns, and ETF funds carry market volatility risks. Before purchasing funds, please carefully read the fund contract, prospectus, and other legal documents, and choose products that match your risk tolerance. Funds carry risks; invest with caution.