Seeking Safe Investments Amidst Volatile Stock Market

The South Korean stock market, after an unprecedented boom, is now experiencing frequent sharp declines, causing anxiety among investors who entered the market with FOMO (fear of missing out).

To navigate this volatile "rollercoaster" market, major domestic securities firms are recommending financial products that prioritize safety. One such product is the Comprehensive Investment Account (IMA), which offers principal protection even if underlying assets like stocks and bonds fall. IMAs pool customer deposits, are managed by securities firms for several years, and diversify investments across stocks, bonds, corporate loans, and venture companies. While the target return is a modest 4% annually, there's potential for additional profit if performance exceeds expectations. However, investors should note that returns are not guaranteed, and only the principal may be returned based on performance. Additionally, early termination of closed-type accounts can lead to principal loss.

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For those who feel fatigued by the extreme volatility of stock prices or for whom preserving assets is most important, we mainly recommend high-interest, high-dividend products.

For those seeking higher returns with some downside protection, profit-sharing funds are suggested. These funds divide beneficiaries into senior and junior classes. Profits are distributed to general investors first, and in case of losses, the securities firm absorbs a portion of the loss up to a certain ratio. These funds offer the advantage of early redemption if the underlying assets rise quickly, or loss mitigation if they fall.

Bond funds or bond-mixed funds are also frequently recommended, especially for investors feeling fatigued by stock market volatility or prioritizing asset preservation. For long-term investors, individual national bonds issued in small denominations are an option. Experts advise balancing growth assets with safe assets for long-term investment, but note that these bonds cannot be traded on the market like regular bonds.

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In the long term, it is important to hold a balanced portfolio of return-seeking assets and safe assets.