"I'd Rather Earn Daily Interest Than Face a Crash"... Investors Fleeing the Stock Market Seek Refuge in Parking-Type ETFs [Personal Finance Trends]

All Top 5 ETFs by Weekly Net Asset Growth Are Parking-Type Products
Interest Accrues Even for a Single Day—Popular for Short-Term Cash Parking
Low Risk of Loss and Usable for Retirement Planning
However, Consider Settlement Lag and Hidden C

As the stock market repeatedly triggers buy and sell sidecars, causing extreme volatility, investors who are struggling to find suitable investment destinations are flocking to parking-type Exchange Traded Funds (ETFs). These products are attracting investors seeking to avoid volatility because they allow for short-term deposits while still offering stable daily returns.

According to ETF Check on July 16, the top products with the most notable net inflows in the domestic ETF market over the past week were mostly parking-type ETFs. The product with the largest increase in net assets was TIGER Money Market Active, which grew by 288.4 billion won. RISE Money Market Active followed with 217.7 billion won, and the representative risk-free benchmark rate tracking product, TIGER KOFR Interest Rate Active (Synthetic), received 198.1 billion won. In addition, 1Q Money Market Active attracted 167.6 billion won, and KODEX Money Market Active gained 95.5 billion won. The top five products with the highest net asset increases were all dominated by parking-type ETFs. The total funds attracted by these five ETFs amounted to 967.3 billion won. In other words, a giant sum, nearly 1 trillion won, has moved into ultra-short-term safe assets.

An asset management company official stated, "As the market displays unpredictable and highly volatile swings, many have sold their stocks to secure cash. Instead of letting this cash sit idle, more investors are parking their funds in daily compounding parking-type ETFs while they wait for the next market entry opportunity."

Parking-type ETFs are ultra-short-term interest-bearing products designed for temporarily ‘parking’ funds, allowing investors to withdraw their money at any time. Like a bank parking account, they yield interest even if held for just one day. They are considered to have a low risk of principal loss and, like stocks, can be traded in real time. Some parking-type ETFs are classified as safe assets, making them useful for filling the mandatory 30% safe asset portion required in retirement pension accounts. In addition, since they can be purchased within an Individual Savings Account (ISA), investors can also seek tax benefits.

In general, parking-type ETFs are categorized based on the underlying asset (interest rate) they track: risk-free benchmark rate (KOFR) types, Certificate of Deposit (CD) rate types, Money Market Fund (MMF) types, and U.S. risk-free benchmark rate (SOFR) types. KOFR-type ETFs track ultra-short-term transaction interest rates backed by government bonds and monetary stabilization bonds. As long as the country does not default, there is virtually no possibility of loss, making them the “safest risk-free asset.” CD rate types track the CD rates issued by commercial banks, and unless interest rates turn negative, they are structured to avoid losses. MMF types involve asset management companies directly investing in highly rated ultra-short-term bonds and commercial paper (CP), seeking alpha returns; while they offer higher yields than other parking-type ETFs, the risk of principal loss is also greater. SOFR types track the U.S. SOFR rate, allowing investors to hold dollar assets and gain the benefits of high U.S. interest rates, though they may be exposed to foreign exchange rate volatility.

Parking-type ETFs are in the spotlight as a safe haven in volatile markets, but there are important precautions to consider before investing. First and foremost, they are not covered by the Depositor Protection Act. Although bank parking accounts are protected up to 100 million won per person at each financial institution, parking-type ETFs are investment products and are therefore not eligible for depositor protection. Settlement delays must also be taken into account: even if you sell an ETF, it takes two business days for the cash to be available for withdrawal, unlike a bank parking account, which allows for real-time withdrawals. If you are allocating a large sum for payment deadlines such as real estate settlements or taxes, or if you are setting aside funds to quickly buy stocks during sudden market downturns, you must factor in this two-day delay when making your financial plans.

For ultra-short-term investments, hidden costs should also be considered. Since there are brokerage commissions and bid-ask spreads incurred during buy and sell transactions, if you only plan to keep your funds deposited for a few days, transaction costs could end up outweighing the interest you earn.

This content was produced with the assistance of AI translation services.