There are several compelling reasons to invest in a foreign region or country including to hedge risk, take advantage of a financial opportunity, or diversify a portfolio. If you've done some research and have decided that investing in South Korean companies might be a good move for your investment portfolio, then South Korea ETFs could be right for you.
There are a few ways to gain exposure to the South Korean financial climate in your investing strategy including stocks, indexes, and mutual funds. However, if you are looking for instant exposure and minimal transactions, an ETF may be your best option.
ETFs have some advantages over other investments, including tax benefits and lower commissions and fees. Some investors appreciate the fact that ETFs can be bought and sold throughout the day, unlike mutual funds. If you've been thinking of dipping your toe into the South Korean market, an ETF may be a good way to test the waters.
- Investing in a foreign country can help you hedge risk, take advantage of a financial opportunity, or diversify a portfolio.
- ETFs have some advantages over other investments, including tax benefits and lower commissions and fees.
- South Korea ETFs include the iShares MSCI South Korea ETF (EWY) and the Direxion Daily South Korea Bull 3x Shares (KORU).
- Be aware that KORU is leveraged, and that type of asset is usually for more advanced trading strategies.
EWY: The iShares MSCI South Korea Index ETF
This South Korea ETF tracks the MSCI Korea 25/50 Index, which targets companies publicly traded on the South Korea exchanges. It gives investors access to large and mid-sized South Korean companies and uses a capping strategy that limits the weight of any single stock in the index to a maximum of 25% of the benchmark.
Some of the top holdings in the iShares MSCI South Korea Index fund include Samsung, Hyundai, and Kia Motors, and some of the top sectors represented are information technology, consumer discretionary, financials, and industrials. Traded under the symbol EWY, the fund has $7.5 billion in assets and was started in 2000.
KORU: The Direxion Daily South Korea Bull 3x Shares
Traded under the symbol KORU, the Direxion Daily South Korea Bull 3x Shares fund tracks the MSCI Korea 25/50 Index. KORU seeks daily performance, minus fund fees and expenses, of 300% of the benchmark. The fund uses a combination of derivatives in its holdings in order to achieve its investing goals. KORU was started in 2013 and includes South Korean company giants such as Samsung, Hyundai Motors, and Naver.
Leveraged ETFs are typically intended only for short-term trading due to the underlying derivatives. Derivative products typically have a high transaction cost when moving month-to-month, naturally deducting from its net asset value.
FLKR: The Franklin FTSE South Korea ETF
This fund is traded under the symbol FLKR and aims to match the performance of the FTSE South Korea Capped Index. Large and mid-sized company are included in the FLKR portfolio and include Samsung Electronics, SK Hynix, and Celltrion. The FLKR: Franklin FTSE South Korea ETF was created in November of 2017 and currently has $76.78 million in total net assets. Its largest allocation is information technology, followed by consumer discretionary, communications services, materials, financials, health care, and a few others.
While ETFs have several key advantages, be aware that ETFs may not be right for every investor. No investment is perfect or without risk, whether it’s ETFs or any other asset.
Take time to understand any ETF fund in which you're thinking of investing. For example, one of the South Korea ETFs is leveraged (KORU), and that type of asset is usually for more advanced trading strategies. Do your own research on these South Korea ETFs, watch how they react to different market conditions, and get to know the businesses that make up the ETF portfolios. The good news is that ETFs are subject to U.S. government securities laws and regulations.
If you have any questions about any of these funds or other ETFs, be sure to consult a broker, adviser, or other financial professionals.