Rapid Growth in ETF Market and Trends in Individual Investors
The ETF market has recently grown to the scale of 300 trillion KRW, attracting attention as an attractive investment tool that enables diversified investment with a small capital. This appeal is particularly strong among the younger demographic, including those in their 20s and 30s. The ability to invest in specific industries or overseas assets with relative ease has resulted in increased participation from this demographic, while the regular cash flow from distributions provides additional financial stability. However, the benefits accompanied by issues such as tax liabilities and the need for a deeper understanding of associated risks remain critical considerations.
Additionally, there is a notable increase in interest from individual investors in KOSPI and KOSDAQ leverage ETFs. According to the Korea Exchange, individual investors have net purchased domestic stocks worth 6.03 trillion KRW, with domestic stock ETF investments reaching 13 trillion KRW. This trend is seen as a combination of changes in government policy and the 'Fear of Missing Out' (FOMO) phenomenon. The Korean government has been driving investors to redirect their focus from overseas to domestic stocks by approving leveraged ETFs for specific blue-chip companies and considering capital gains tax reductions for foreign stock sales. Despite these initiatives, concerns linger about investors potentially underestimating the risks associated with leveraged ETFs.
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