Most Fund Investors Have No Idea of Risk
By Yoon Ja-young
Staff Reporter
About half of Korean investors have no idea about the risk when investing in funds, a survey showed Wednesday, with only one out of five investors understanding investment prospectuses.
The survey of 3,500 people by Korea Investors Education Foundation showed that investing in fund products has become very common among Koreans. Seven out of 10 turned out to be either investing in funds or have done so in the past. People were on average investing a total of 28.38 million won spread over three products.
They were investing an average of 518,000 won in installment type funds each month, accounting for 13.9 percent of their monthly income.
Even though investors were pouring a considerable sum of money into these funds, Koreans turned out to be reckless, with nearly 50 percent not understanding the risks.
Approximately 37.5 percent of the respondents said they didn't understand the risks despite banks or securities companies explaining them. Meanwhile, 6.7 percent said they didn't listen, and 3.4 percent said they weren't informed at all about the risks.
The survey also showed that Korean investors are not planning investments from a long-term perspective. Among those who chose lump sum investment instead of paying money every month, most were planning to put the money in the fund for less than three years. Around 30 percent planned investing for between one and two years, and over 40 percent planned on withdrawing the money within a year. Only 12.7 percent were considering continuing the investment for over three years, despite the fact that investment returns tend to improve the longer they are made.
Preparation for retirement turned out to be the biggest motive for investing in funds.