ETF Investing: Global Trends and the Growth of the Korean ETF Market

Growth Trends and Characteristics of the Korean ETF Market

Rapid Growth of the ETF Market: As of 2022, the net assets of ETFs in South Korea were approximately 100 trillion KRW, growing by 70% to about 170 trillion KRW by 2023.
Diverse Product Composition: The number of listed ETFs in Korea exceeds 900, surpassing the number of companies listed on the Korean stock market.
Active Trading: Approximately 30% of KOSPI trading volume comes from ETF trading, indicating that ETFs have become a popular and commonplace investment tool.

Advantages of ETF Products and Investment Strategies

Diversified Investment:
- ETFs typically include at least 10 stocks, offering low volatility and stable investment opportunities.
- Investors are not as affected by individual stock performance and news.
- Choosing an ETF that tracks specific themes or indices is suitable for long-term investment.
- Representative index ETFs include the S&P 500 and Dow Jones Industrial Average.
Transparency and Ease of Trading:
- Real-time portfolio disclosure allows investors to easily understand the holdings.
- Entry and redemption are faster and simpler compared to general funds.
Long-Term Investing and Compound Interest:

- Historical long-term data shows that the S&P 500 has averaged annual returns of 7-12%.
- Consistent long-term investment can lead to compound interest and cost averaging benefits.

ETF Classification and Selection Guide

Active vs. Passive ETFs:
- Passive ETFs: Products that faithfully track the underlying index. They are less volatile and more reliable.
- Active ETFs: Allow fund managers greater discretion, enabling more aggressive management.
Currency Hedge (H) Option:
- Choose the H option to protect against currency fluctuation risks.
- The returns on commodity or foreign stock ETFs can vary depending on exchange rate changes.
Total Return (TR) Index:

- The TR index maximizes returns through reinvestment of dividends.
- Choose TR ETFs if you don’t plan to utilize dividends personally.

Global ETF Trends

Artificial Intelligence Theme:
- AI-related ETFs are expanding from semiconductors to software, power infrastructure, and services.
- The AI value chain includes infrastructure, semiconductors, generative AI, and software.
- As the significance of GPUs grows, ETFs related to custom semiconductors (ASIC) are also gaining attention.
Defense Industry:
- Growth in new technology defense industries such as advanced robots, drones, and aerospace.
- ETF options for US defense companies (e.g., Lockheed Martin, Raytheon Technologies).
Dividend ETFs:

- Monthly dividend ETFs (paying dividends monthly) are gaining popularity among retirement investors.
- When selecting dividend ETFs, the stability of the underlying assets is crucial.

Tax Strategies and Tax Savings Methods

Tax Differences Between Domestic and US ETFs:
- Domestic ETFs: Both capital gains and dividend income are taxed at 15.4%.
- US ETFs: Capital gains are taxed at 22%, with non-taxation benefits for the first 2.5 million KRW.
- Adjust the selection of domestic/US ETFs depending on the investment amount and target returns.
Utilizing Tax-Advantaged Accounts:
- Consider that only domestic ETFs can be included in IRP or retirement accounts.
- Overseas ETFs may be more tax-efficient for relatively smaller investments.

Bond and Covered Call ETFs

Bond-Based ETFs:
- ETFs based on US long-term treasury bonds (30 years) offer stability and profitability.
- Bond ETFs with a covered call strategy generate income through option premiums.
Evolution of Covered Calls:
- Daily options strategies are implemented to pursue both income and the potential for underlying asset appreciation.
- In a bull market, this increases the potential for upward movement and maximizes dividend yields.

Optimal Diversification Strategy for Investment Assets

6:4 Rule:
- Research indicates that a ratio of 60% equities and 40% bonds is stable.
- Construct a portfolio with bond ETFs and income-oriented ETFs.
Diversification of Time and Assets:
- Adhering to a monthly regular investment principle reduces volatility risk and provides cost-averaging benefits.

Key Promising Themes

Global Demographic Changes and India Investment:
- India’s young population structure and US supply chain expansion are attracting attention for future growth potential.
- However, a cautious approach is needed due to high valuations.
Commodities and Gold ETFs:
- Gold is favorable as a long-term inflation hedge and safe-haven asset.
- Spot gold ETFs, rather than futures ETFs, are more cost-efficient for long-term investment.

< Summary >

The Korean ETF market has grown by 70% in one year and provides a more stable and long-term investment alternative to individual stocks.
ETFs offer diversified investment opportunities, transparency, and ease of trading.
Global investment trends include AI, defense, and dividend ETFs, expanding various value chains.
Select domestic or US listed ETFs based on tax strategies and consider the use of tax-advantaged accounts.
Bond ETFs and covered call strategies offer additional income and stability.
Apply principles of time and asset diversification when investing.

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– 미국 주식 좋다고 투자했는데 망하는 사람 특징 (신성호 연구위원 풀버전)

DeepSeek's Latest AI Model: Key Highlights and Global Impact

1. The Emergence of DeepSeek and Why It's Gaining Attention

DeepSeek is an AI model developed by a hedge fund manager in China.
It was unveiled at the World Economic Forum in Davos in January 2023, drawing the attention of key global leaders.
Considered a next-generation AI, it is gaining recognition for its low hardware requirements.
Key Features:
- Low-Cost, High-Efficiency AI: DeepSeek has demonstrated the ability to handle large-scale computations while operating with only 248 NVIDIA H800 chips.
- Open-Source Approach: DeepSeek has been released as an open-source model, accessible to anyone.
- User-Friendly: It explains its operating principles and processes and provides logical answers.

2. The Impact of DeepSeek on the AI Market

Economic Ripple Effect: DeepSeek is currently ranked #1 on the Apple App Store, replacing the existing powerhouse, ChatGPT.
Innovation in AI Operating Costs: While traditional AI required high-spec GPUs and significant investment, DeepSeek has shown similar or even superior performance at a much lower cost.
- Compared to Meta's annual investment costs, DeepSeek's development cost was only $5.576 million (approximately 8 billion won).
DeepSeek's Potential to Revolutionize AI Research:
- The decreased need for NVIDIA GPUs has negatively impacted global semiconductor stock prices.
- It has already set off alarm bells for many large corporations, including a drop of over 12% in NVIDIA's stock value.

3. Academic and Practical Achievements

Achievements:
- Math Ability Assessment (MI Test): Achieved a high accuracy rate of 79.8%, surpassing existing AI models.
- GitHub Issue Resolution: Recorded a 49.2% resolution rate in automated software bug resolution.
- Natural Language Understanding and Generation: DeepSeek has shown high reliability in various tasks such as text generation, document creation, and providing structured answers.
Potential for Democratization of AI:
- Utilizing DeepSeek's open-source nature can be expected to reduce development costs and technological monopolies.
- The existing US monopoly on AI technology is likely to gradually weaken.

4. Political and Geopolitical Implications

Intensified AI Hegemony Competition:
- Raises the possibility of the US being overtaken by China in AI technology.
- Geopolitically, China's low-cost, high-efficiency AI technology signals a change in the global order.
Challenges and Questions:
- While initial announcements stated DeepSeek used only 2,000 NVIDIA chips, it appears that 50,000 were actually used internally.
- Details about the data processing and AI learning processes are still unclear.

5. Market Reaction to DeepSeek and Corporate Impact

Impacted Stocks: Share prices of AI-related tech giants such as NVIDIA, AMD, Microsoft, and Meta have significantly declined.
Efficiency in AI Technology: The potential reduction in large-scale operating costs signals a major shift in the overall investment market.
Crisis in the Global Semiconductor Market: The decrease in the importance of NVIDIA GPUs has brought about economic shocks.

< Summary >

DeepSeek is an innovative AI model developed in China, achieving low costs and high performance, which is creating shocks in the global AI market.
Especially by achieving high performance with low-spec GPUs, it is disrupting the existing investment paradigm and making the AI leadership competition more favorable to China.
Furthermore, DeepSeek's open-source strategy suggests the potential for democratizing AI technology.